Treasuries fall with German bonds as Greece damps safety bid
US Treasuries fell along with German government bonds as Greece made a new proposal to secure a bailout loan, curbing demand for haven assets.
Ten-year Treasury note prices extended Thursday’s biggest decline in two months after Greek Prime Minister Alexis Tsipras offered to meet most of the demands made by creditors, fueling optimism the nation will be able to stay in the euro union. German 10-year bunds, Europe’s benchmark sovereign securities, fell for a third day. Australian bond yields jumped the most in a month as a two-day rally in Chinese shares fueled speculation a rout in the world’s second-biggest stock market is ending.
“The feel-good factor about Greece and China being up again is weighing on Treasuries,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “But I am going to be skeptical. The risk is the Greece story doesn’t play out so well and certainly as the day progresses you are going to have some guys buying Treasuries back. I don’t think people want to go home short this weekend.”
A short position is a bet an asset’s price will decline.
The benchmark US 10-year note yield rose four basis points, or 0.04 percentage point, to 2.37 percent as of 7:03 a.m. New York time, according to Bloomberg Bond Trader data. The 2.125 percent security due in May 2025 fell 3/8, or $3.75 per $1,000 face amount, to 97 29/32. The yield jumped 13 basis points Thursday, the most since May 11.
The yield on German bunds jumped 12 basis points to 0.84 percent, the highest in a week. Australian 10-year yields climbed 14 basis points to 2.94 percent, the biggest increase since June 4.
Haven demand
Investors snapped up government bonds earlier this week because of Greece and China. Samsung Asset Management says it’s too soon to say turmoil in the two nations is over.
“Doubts about Greece and the Chinese market will last through the end of the month,” said Wontark Doh, the company’s head of overseas fixed-income investment in Seoul. “The sharp decline in US Treasury prices will not last.”
The Greek government sought a three-year bailout loan of at least 53.5 billion euros ($60 billion) in a final effort to keep the country in the euro. In exchange, it offered a package of reforms and spending cuts similar to those presented by creditors on June 26.
The Shanghai Composite Index jumped 4.5 percent Friday, extending its advance in the past two days to 11 percent. That snapped a decline that had seen it tumble more than 30 percent from its peak in June.
Even after Thursday’s selloff, US government securities have returned 0.5 percent this week through Thursday, according to the Bloomberg US Treasury Bond Index. The gauge has risen 0.3 percent in July, rebounding from declines in each of the previous three months.
Federal Reserve officials have warned of the risks the turmoil in Greece posed. Fed Chair Janet Yellen will discuss the central bank’s economic outlook in Cleveland, Ohio on Friday.
[Bloomberg]
