Worries about French, Dutch politics boosting U.S. bonds
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose on Monday, pushing 10-year yields down to their lowest in almost two months, as worries about potential changes in French and Dutch political leaders added to weakening economic data in the region, boosting the appeal of the relative safety of U.S. bonds.
Yields on 10-year notes 10_YEAR -2.49% , which move inversely to prices, fell 4 basis points to 1.93%, their lowest level since late February. A basis point is one one-hundredth of a percentage point.
Five-year note yields 5_YEAR -4.00% slipped 2 basis points to 0.83%, the lowest since early March
The yield on 30-year notes 30_YEAR -1.95% declined 5 basis points to 3.08%, their lowest level since early March.
The euro-zone preliminary composite purchasing managers’ index, or PMI, unexpectedly fell to a five-month low.
That followed first-round presidential elections in France where French President Nicolas Sarkozy came in second behind Socialist challenger François Hollande. A surprise third-place showing by anti-euro, anti-immigration National Front leader Marine Le Pen also underlines growing anger over austerity and the ongoing euro-zone crisis, strategists said.
The Dutch government, led by Prime Minister Mark Rutte, was set to resign and force new elections after long-running budget talks collapsed over the weekend. Read about French, Dutch politics.
“The uncertainties of Europe’s political landscape combined with weaker PMI data out of the region have aided the flight-to-quality underpinnings for the market,” said David Ader and Ian Lyngen, bond strategists at CRT Capital Group.
Also in focus for the week, the Federal Reserve’s Federal Open Market Committee will begin a two-day policy meeting on Tuesday. Fed Chairman Ben Bernanke is hold a press conference after the meeting ends Wednesday.
Many analysts don’t expect any major changes to the FOMC’s statement or policy measures; officials will continue to forecast low interest rates until 2014 and will end the Fed’s current bond-purchase program in June.
“We will be focusing on the updated economic forecasts as well as the Q&A segment after the official releases,” bond strategists at Nomura Securities wrote in a note. “We believe the markets will be disappointed, as has been the case at recent Fed events.”
Deborah Levine is a MarketWatch reporter, based in New York.
