MW: Treasury yields fall as investors flee to safety
Treasury prices rallied, pushing yields on the 10-year bonds below 2% Wednesday, as investors flocked to safe assets amid a renewed rout in global stocks.
Global-equity markets sold off with the Dow Jones Industrial Average DJIA, -2.47% falling more than 300 points. The European benchmark Stoxx 600 index STXX, -2.92% were down sharply. Meanwhile, oil prices CLH6, -4.43% slid below $29 a barrel.
Investors also pushed up prices of gold, which was trading 1% higher.
Analysts noted that the rally in government bonds is driven by momentum that has been pounding equities over the past several weeks.
“There is definitely a much heavier volume in Treasury markets today as many asset managers are reallocating money from stocks to bonds. Interest-rate markets, which normally and over the long term, trade on future expectations or fundamentals, occasionally trade on fear,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. He noted that fear has been a guiding principle, so far in 2016.
The yield on the 10-year Treasury note TMUBMUSD10Y, -4.70% —the market’s benchmark bond—fell 8 basis points to 1.97% compared with 2.038% late Tuesday, marking its lowest level since October 2015.
The yield on the 30-year bond TMUBMUSD30Y, -3.43% fell 9% to 2.739% and the yield on the two-year note TMUBMUSD02Y, -6.11% declined 5.2 basis points to 0.821%.
Treasury yields fall when prices rise.
Meanwhile, Wednesday’s economic data, although weaker than expected, did little to influence bond investors, given the strong flight-to-safety buys dominating the market.
Housing starts fell by more than expected last month to an annual rate of 1.15 million and consumer prices fell again in December due mostly to falling costs of food and gasoline.
For 2015, inflation rose just 0.7%, the second-slowest rate in 50 years and remain below the Federal Reserve’s target rate of 2%, which the Fed views as healthy for an economy.
In Europe, yields were mixed in the eurozone. The benchmark 10-year German yield TMBMKDE-10Y, -12.28% fell 5.9 basis points to 0.421%, its lowest level since late October.
