November 23, 2018 / 7:12 PM / in 6 months

TREASURIES-Yields fall as declining stocks boost safety bid for bonds

 (Updates prices)
    * Bonds gain on falling stocks, oil
    * Yield curve flattest in eight weeks
    * Bond market closed early on Friday

    By Karen Brettell
    NEW YORK, Nov 23 (Reuters) - Benchmark U.S. Treasury yields
fell to eight-week lows on Friday and the yield curve flattened
as falling stock and oil prices increased safe-haven buying of
long-dated U.S. government bonds.
    U.S. stocks closed lower in a shortened post-holiday trading
session as the energy sector tumbled on continued weakness in
oil prices, and the benchmark S&P 500 confirmed that it had
entered its second correction of 2018.             
    “We’re seeing a bit of a continuation to the destructive
price action that we’ve seen in risk assets and oil, and that’s
blown back to Treasuries,” said Mike Lorizio, head of Treasuries
trading at Manulife Asset Management in Boston.
    Benchmark 10-year notes             gained 5/32 in price to
yield 3.043 percent, after earlier dropping to 3.032 percent,
the lowest level since Sept. 28 and down from 3.061 percent on
    The bond market was closed on Thursday for the Thanksgiving
holiday and closed early on Friday at 2 p.m. (1900 GMT).
    The 10-year Treasury yields have fallen from 3.25 percent on
Nov. 7 as tumbling stock markets increased demand for low-risk
    Shorter-dated debt underperformed on Friday, however, as
expectations of further interest rate hikes by the Federal
Reserve kept pressure on the notes, which are highly sensitive
to rate moves.
    Two-year note yields            were at 2.812 percent, down
from 2.977 percent on Nov. 8 as falling stocks and weakening
global growth raised doubts whether the U.S. central bank will
be able to continue its rate-hike cycle much further without
damaging the economy.
    However, “the U.S. economy has not shown any signs of
weakness or any signs of changing the current trajectory. With
that in mind the front end of the curve has probably gone about
as far as it can,” said Lorizio.
    The yield curve between two-year and 10-year notes
               flattened to 22.60 basis points, the lowest level
since Sept. 28.
    The Federal Reserve will release minutes from its November
meeting on Wednesday.
    Futures traders are pricing in a 74 percent chance of a rate
hike in December when the Fed holds its last policy meeting of
the year, according to the CME Group’s FedWatch Tool. 

 (Reporting by Karen Brettell
Editing by Chizu Nomiyamaand Leslie Adler)
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