MW: Treasurys rise on Syria fears ahead of auction
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasurys rose Tuesday, sending yields lower, as tensions over a conflict in Syria weighed on risk appetite.
U.S. Secretary of State John Kerry said Monday that the Syrian government must be held accountable for its use of chemical weapons against rebels, heightening worries that military action could heat up in the coming days or weeks.
Treasurys moved higher on the news, extending price gains into a third consecutive day. The benchmark 10-year note 10_YEAR -1.33% yield, which moves inversely to price, fell 3.5 basis points on the day to 2.757%.
The 30-year bond 30_YEAR -0.61% yield fell 2 basis points to 3.745% while the 5-year note 5_YEAR -2.20% yield fell 3.5 basis points to 1.559%.
Gold also gained on Syria fears while U.S. stocks fell.
After data showed home prices rose in June, Treasurys held onto their gains. The S&P/Case Shiller gauge showed 2.2% in growth, a robust reading, but down from 2.5% growth in May.
Treasury prices have fallen in recent weeks, sending the 10-year note yield above 2.90% for the first time since July 2011, as investors continue to fret about the Federal Reserve’s plan to begin curbing its $85 billion-per-month bond purchase plan.
But yields retreated in recent days as a string of weak data helped call into question market expectations that the Fed would begin tapering at its next policy meeting in September. The Fed has said any monetary-policy action will be based on economic data.
The 2-year Treasury note 2_YEAR +1.33% yield fell 1 basis point to 0.368% ahead of an auction $34 billion of the notes at 1 p.m. Eastern. This marks the first reduced-size sale since 2010, as the government’s shrinking deficit prompts a cut to borrowing.
“Relative value does not look super compelling, as curves have steepened out, but 2-year yields are closer to the upper end of the recent range and historically outright yields mattered more than relative value,” said Stanley Sun, strategist at Nomura Securities, in a note. Sun expects “reasonable” demand for the auction.
Other government bonds that generally benefit from investor demand for safety saw their prices rise Tuesday. The 10-year German bond, or bund BX:TMBMKDE-10Y -4.27% yield fell 4.5 basis points to 1.848%, according to Tradeweb. The United Kingdom’s 10-year bond, or gilt BX:TMBMKGB-10Y -4.40% yield fell 12 basis points to 2.587%.
Ben Eisen is a MarketWatch reporter based in New York.
