Credit markets: Treasurys jump on stock fall, rate talk
A trader works on the floor of the New York Stock Exchange at the Closing Bell in New York, New York, USA, Mar. 5, 2013. EPA/FILE/KEITH BEDFORD
New York (USA), Jun 4 (efe-epa).- United States government bond prices climbed again, benefiting from a decline in technology stocks and a Federal Reserve official opening the door to a near-term interest rate cut, according to a Dow Jones Newswires report made available to EFE on Tuesday.
Already nervous about the US President Donald Trump administration's tariff policies and a recent run of soft economic data, investors on Monday found new reasons to buy bonds following reports that US regulators were considering increasing scrutiny of industry giants such as Facebook and Alphabet.
Those reports sent technology shares sliding and boosted US Treasurys, which often benefit when investors are fleeing riskier assets.
Adding to the bid for bonds, Federal Reserve Bank of St. Louis President James Bullard said in remarks prepared for a presentation in Chicago that a reduction in short-term interest rates "may be warranted soon" in light of an expected slowdown in US economic growth and "ongoing global trade regime uncertainty."
Bullard, a voting member of the rate-setting Federal Open Market Committee, has long been in favor of low interest rates.
But his remarks reinforced expectations among investors that the Fed will likely cut rates this year. That created a strong demand for short-term Treasurys, which are particularly sensitive to changes in monetary policy. Also, lower interest rates make bonds' fixed coupons more appealing.
After logging its largest one-session decline in a year on Friday, the yield on the benchmark two-year Treasury note fell another 0.089 percentage-point to 1.848 percent.
The yield on 10-year note settled at 2.085 percent - its lowest close since September 2017 - compared with 2.139 percent Friday.
Yields, which fall when bond prices rise, have been sliding for a month due largely to heightening trade frictions between the US and major trading partners and fears that could crimp global growth.
Amid these worries, investors were caught off guard last week when President Trump said the US would impose escalating tariffs on Mexico unless the country did more to stem the flow of migrants into the US.
While China and Mexico both signaled a willingness to negotiate over the weekend, the US also fulfilled promises to remove India from a privileged trading program known as the Generalized System of Preferences.
Some analysts cited that as a sign of the Trump administration's hard-line stance on trade, giving investors further reason to buy Treasurys.
Jim Vogel, an interest-rates strategist at FTN Financial, said Monday's yield declines were particularly noteworthy because they came during the first trading session of the month, a day when yields often bounce back after falling in the previous session - when some investors buy Treasurys to match the changing makeup of certain bond indexes.
Recent events have "destroyed what was extraordinarily high confidence that eventually trade would work out," making it difficult for yields to rise, Vogel said.