By Cynthia Lin
U.S. Treasury prices rose Wednesday as concerns over global growth and ongoing geopolitical tensions sent investors into haven assets.
In midday trading, benchmark 10-year notes rose 4/32 in price to yield 2.467%, according to Tradeweb, near its 2014 low of 2.401% hit in May. The 30-year bond advanced 2/32 to yield 3.274%.
Bond yields fall when prices rise.
Wednesday's gains extended an August rally that started after last week's U.S. employment report showed fewer jobs added in July than expected. Concerns about geopolitical tensions between Russia and Ukraine also boosted demand for haven bonds, while abandoned acquisition pursuits in the corporate space sappedoptimism in riskier assets.
"Yields continue to push lower due to concerns globally and geopolitical issues," said Gary Pollack, head of fixed-income trading in New York at Deutsche Bank AG's private wealth-management unit.
Sanctions issued by Russia in reaction to those set against it by the U.S. and European Union have raised questions about the potential impact on exporters and economies of the parties involved.
Meanwhile, Germany reported factory orders unexpectedly falling in June, while Italy's economy was shown contracting last quarter. That fueled a bid in its region's haven bonds, with Germany's 10-year bond yield falling 0.07 percentage point to a record low 1.1%.
Falling German yields has made rates on U.S. Treasurys look relatively attractive to global bond investors. The yield gap between the nations' 10-year bonds sits at 1.36 percentage point, near its highest since mid-1999.
Still, bond traders say the pull Germanyields have on U.S. yields has its limits. With the U.S. economy's recovery well under way and the Federal Reserve seemingly poised to tighten policy next year, the long-awaited rise in Treasurys yields looks to be on the horizon.
"If and when it comes times for U.S. yields to rise, it will," said Mr. Pollack, who sees the 10-year note yielding 3% by year-end. "You'll just need a stronger economy and more inflationary pressure to raise the likelihood that the Fed will start to raise rates soon--something that should start to creep in in the fourth quarter."
For now, a swathe of global concerns has kept the 10-year yield tied to 2.5% since early May.
The Fed's latest policy statement July 30 also showed a central bank that is still inclined to keep rates low until it sees more inflation and sustainable U.S. economic growth. Bond investors say wage growth is a vital turning point that could lead to broader inflation and unlock a selloff in bonds.
Write to Cynthia Lin at firstname.lastname@example.org
(END) Dow Jones Newswires
August 06, 2014 13:42 ET (17:42 GMT)
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