BOND REPORT: Treasurys Follow European Bonds Higher Amid Italian Election Jitters
23 Febrero 2018 - 08:09AM
Noticias Dow Jones
By Sunny Oh
The Italian election will be held on March. 4
Treasury prices rose, pulling yields lower, on Friday to follow
the rally in European government paper after unease over the coming
Italian election set for early March has stoked demand for
safe-haven bonds.
What are bonds doing?
The 10-year Treasury note yield slipped 3.1 basis points to
2.886%, according to Tradeweb data. The 2-year note yield was down
1.6 basis point to 2.238%. The 30-year bond rate fell 3.2 basis
points to 3.174%.
The yield for the 10-year German government bond, or bunds, fell
4.5 basis points to 0.660%. But the 10-year Italian government bond
yield was up 0.9 basis point to 2.083%, extending a weeklong climb
from 1.998%.
Bond prices move in the opposite direction of yields.
What's driving markets?
Traders looked ahead to the Italian election on March. 4 where
the chance of a populist euroskeptic party being elected to
government caused Italian bonds to come under pressure and bonds of
other eurozone economies to rally. In particular, German bonds, or
bunds, received a lift as the traditional haven asset in European
markets.
Treasurys tend to follow bunds as they share similar
characteristics and are both seen as high-quality and liquid
assets.
Analysts and the latest polls say the most likely result from
the election is a hung parliament. The potential for political
deadlock threatens the prospect of economic reforms needed to
resuscitate Italian growth and a banking system weighed down by bad
debts. Italy's government debt as a percentage of GDP stands above
130%, the second highest levels in the eurozone.
See: Why investors are counting down to the most important date
on Europe's political calendar
(http://www.marketwatch.com/story/investors-are-counting-down-to-the-most-important-date-on-europes-political-calendar-2018-02-20)
What did analysts say?
"In the run up to Italian elections next Sunday, Italian debt
has led all credit spreads in Europe wider this week. That includes
a serious reversal of profits in senior bank obligation credit, a
weakness that appeared to have worked itself out in 2017. The
result this morning is a 4 - 5 basis point decline in higher grade
[European] sovereign yields to levels not seen in four weeks," said
Jim Vogel, interest-rate strategist for FTN Financial.
What else is on investors' radar?
New York Fed President William Dudley, Cleveland Fed President
Loretta Mester, Boston Fed President Eric Rosengren will speak
during Chicago Booth School of Business' Fed policy forum which
begins from 10 a.m. to 4 p.m. Eastern. San Francisco Fed President
John Williams will give a talk on the "Outlook on the Economy and
the Implications for Monetary Policy" at 3:40 p.m.
Fed Chairman Jerome Powell is set to testify next week to the
House's Committee on Financial Services as part of its semiannual
report on monetary policy to Congress. This will be the first time
Powell will preside over the affair, after taking up the reins from
Janet Yellen in February.
(END) Dow Jones Newswires
February 23, 2018 08:54 ET (13:54 GMT)
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