BLBG:Treasuries Rise for Third Day on Italy Election Concern
Treasuries rose for a third day as Italy edged closer to a new election, boosting demand for the safest assets after an anti-austerity vote last week left Europe’s third-largest economy in political deadlock.
Ten-year U.S. yields fell to the lowest level in more than five-weeks after China tightened mortgage rules to cool its property market, pressuring Asian stocks. Euro-area finance ministers meet in Brussels today to discuss issues including a bailout for Cyprus. In Rome, a top aide to Democratic Party leader Pier Luigi Bersani said the country may need to hold another election this year after passing new electoral laws.
“There are a number of uncertainties like the Italian elections, the issue of Cyprus and these things bring risks to the market,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “This is the context in which bonds normally do well. We are, in the short-term, bullish on Treasuries because when you look at the 10-year yield there is still scope for it to fall.”
Benchmark Treasury 10-year yields fell one basis point to 1.84 percent at 9:02 a.m. London time, according to Bloomberg Bond Trader data, after reaching 1.83 percent, the lowest level since Jan. 24. The rate declined 12 basis points, or 0.12 percentage point, last week, the most since the period ended Aug. 31. The price of the 2 percent note due February 2023 was 101 15/32.
The 10-year rate may reach 1.80 percent in the next few weeks, Lammens said. The yield last fell to that level on Jan. 2 according to data compiled by Bloomberg.
Italian Impasse
Italian political instability, after last week’s election ended in a four-way split, threatens to reignite concern about the deepening of Europe’s debt crisis. Voters handed the party of comedian-turned-politician Beppe Grillo, with its anti- spending cut message and a call for a referendum on euro membership, more than 25 percent of the vote.
In China, the cabinet on March 1 told cities with “excessively fast” price gains to raise down-payment requirements and interest rates on second-home mortgages. China’s stocks plunged today, dragging down the CSI 300 Index by the most in two years.
U.S. government securities returned 0.2 percent in February after accounting for interest payments, according to Bank of America Merrill Lynch indexes.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net.
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
