US Treasury prices climbed on Monday as renewed violence in Iraq prompted a world-wide retreat from equity markets in favour of safe-haven debt.
Investors had largely ignored developments in the Middle East in recent months, but the killing overnight of the head of Iraq's US-appointed Governing Council put geopolitical concerns back on the market's radar.
Adding to the anxiety, four small bombs exploded outside branches of British bank HSBC in Ankara and Istanbul on Sunday night, hours before British Prime Minister Tony Blair was set to visit Turkey.
Such widespread tensions helped lift an otherwise depressed government debt market.
"Bonds are up on rising geopolitical risks - the assassination of the head of the Iraqi Council and also the bombs exploding in Turkey - and falling global equities," said Mary Anne Hurley, vice-president of fixed-income trading at D.A. Davidson.
The benchmark 10-year Treasury note rallied 20/32 to yield 4.69 percent from 4.77 percent on Friday and down from peaks near 4.90 percent. The 4.90 to 5.00 percent level is expected to present stiff resistance for 10-year yields.
The 30-year bond rose 28/32 to yield 5.43 percent, down from 5.49 percent. Two-year Treasuries were up 4/32 at a yield of 2.47 percent. Five-year notes rose 13/32 to yield 3.81 percent, down from 3.91 percent.
Major US stock indexes slipped just over 1 percent as the attacks in Iraq and Turkey rattled nerves.
Treasury prices were also supported by worries that a relentless rise in energy prices could crowd out spending in other sectors of the economy and hamper the US expansion.
Against that backdrop, the chances of a June Federal Reserve interest rate hike according to futures markets eased to 86 percent after looking like a sure bet on Friday, just after April inflation data was released.
Bonds largely disregarded a New York Fed manufacturing survey for May showing a strong regional factory sector. The Empire State survey slipped to 30.2 this month from April's 34.0, but most component indexes were higher.
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