By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices fell on Thursday, pushing yields up to their highest level since mid-September, with traders going back to two long-standing metrics of investor demand for safety from elsewhere in the world.
Yields on benchmark 10-year notes 10_YEAR +3.41% , which move inversely to prices, rose 4 basis points to 1.84%, touching a level they haven't closed above in about six weeks.
A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields 30_YEAR +1.63% rose 4 basis points to 2.99%, after peaking over 3% for the first time in about a week.
Yields on 5-year notes 5_YEAR +9.89% added 6 basis points to 0.83%.
The story starts out in Asia, with the Japanese yen — a currency that has for decades been used as a trading vehicle to counter what have become known as risk-on trades into higher-yielding bonds or currencies, or commodities or stocks.
The traditional logic is the Japanese savers, and there are a lot of them, like higher Treasury yields — both when they are rising, and just when they yield more than Japanese yields — which isn't a very high bar. So today, is the tail wagging the dog, with the falling yen pushing up U.S. bond yields?
Against the Japanese yen, the dollar USDJPY +0.5869% rose above 80 yen, a level not seen since late June. Read more about dollar, British pound,
“Increased speculation over a Japanese stimulus package tomorrow, up to 700 trillion yen, continues to support the Nikkei, with dollar-yen over 80, correlated historically with higher Treasury yields,” said Richard Gilhooly, director of interest-rate strategy at TD Securities.
Then traders in Europe come in and have something else to look at: German bunds. Ten-year German bund yields DE:10YR_GER +3.16% rose 6 basis points to 1.61%.
“Bunds too are off, though the rationale there is of speculation Greece will get its funding even though European money growth slowed last month,” said bond strategists at CRT Capital Group. Bunds and Treasurys are considered safe assets to hold if you’re worried about the outlook for the economy — whether that means just in Europe or the U.S. or globally.
“Our market has been highly correlated to developments in Europe and bunds surely must be a tad more sensitive than we are,” the CRT strategists wrote in a note.
So it shouldn’t be surprising that Treasury prices remained under pressure on Thursday after the U.S. durable-goods report showed core orders, a closely watched metric for overall growth, were flat, while analysts expected a good increase. Read: Durable-goods orders rebound last month.
A separate report showed weekly jobless claims fell to 369,000, close to economists’ forecasts. Read: U.S. initial jobless claims drop to 369,000.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
