By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose Tuesday, pushing yields down, as some investors had expected Spain to request aid from the euro zone already, and as anti-Japanese protests in China over disputed islands weighed on investors willingness to stay in riskier assets.
“Treasurys are higher this morning as tensions over Chinese-Japan relations and Spain’s aid decision support prices,” said bond strategists at RBS Securities.
Yields on 10-year notes 10_YEAR -3.03% , which move inversely to prices, fell 6 basis points to 1.79%. A basis point is one one-hundredth of a percentage point.
Thirty-year yields 30_YEAR -1.68% declined 5 basis points to 2.98%, taking the yield back under 3%.
Analysts also shrugged off the decent demand seen at Spain’s short-term bill auction. Buyers probably expect Spain to ask for a bailout, which will prompt the European Central Bank to prop up the country’s debt market. A better test will be a longer-term debt sale Thursday.
That theme is being overshadowed by reports on data showing bad loans at Spanish banks hit a record. Read more on Spanish banks on Bloomberg.
“We are also reminded that the situation in Europe is far from resolved with the euro-zone finance ministers holding clearly differing opinions on the notion of ECB bond-buying and a banking union,” said bond strategists at CRT Capital Group.
The rift between China and Japan has increased volatility in financial markets, yet analysts see it as temporary. Read story on China, Japan.
Also of interest, analysts mulled data showing foreign investors stepped up purchases of Treasurys in July. While slightly dated, the report is one piece of information looked at every month for any changing trends in who is buying U.S. bonds, a pretty key determinant of yields. Read more on foreign purchases of U.S. stocks, bonds.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
