US Treasury yields fall as nervousness about the China's currency and Britain's exit from the European Union rekindle safe haven demand for low-risk government bonds ahead of this week's $56 billion supply. A weakening Chinese yuan has stoked worries about the country's capital outflows. On Saturday, the government said foreign exchange reserves fell to near a six-year low at the end of December.
China's offshore yuan fell a bit against the dollar on Monday following a large increase last week amid speculation the Chinese central bank pushed up overnight borrowing costs to quell bearish bets on the currency. "People are worried what China is going to do next," said Thomas Roth, senior Treasury trader at MUFG Securities America in New York. Comments from British Minister Theresa May revived fears about a "hard Brexit," in which border controls will be given priority over market access.
May said in a television interview on Sunday she is not interested in Britain keeping "bits" of its EU membership. The yield on benchmark 10-year Treasuries was down 3 basis points at 2.385 percent, while the 30-year bond yield was 3 basis points lower at 2.975 percent. Analysts said the day's drop in yields result from reduced trading, with Japanese markets closed for a holiday.
Monday's decline in yields was mitigated as some investors prepared for this week's supply in longer-dated government bonds: $24 billion in three-year notes, $20 billion in 10-year debt and $12 billion in 30-year bonds. Bond dealers hedging on the corporate bond supply they underwrite also put a floor on the yield decline. Companies are expected to sell $25 billion to $30 billion in investment-grade debt this week after last week's $55 billion in supply was the sector's third-biggest week of issuance on record, according to IFR, a unit of Thomson Reuters.
Comments
Comments are closed.