NEW YORK: US Treasury debt yields retreated on Thursday, as risk appetite faded amid fresh concerns about Deutsche Bank triggered by a news report saying a number of funds that clear derivative trades with the German lender have withdrawn excess cash and positions.
US yields, which move inversely to prices, traded higher all morning as oil prices rose on news OPEC will cut crude production, but fell sharply on the Deutsche Bank news reported by Bloomberg.
In response, a Deutsche Bank spokesman said the bank is confident the vast majority of trading clients understand that the group has a stable financial position.
Deutsche Bank shares ended 1 percent higher in Europe, but its American Depositary Receipts (ADRs) which trade in the US were down nearly 7 percent at $11.44.
"It was all about Deutsche Bank," said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald in New York. "It was a risk-off trade across all most major asset classes. This was a pretty vicious uptick in Treasuries."
Deutsche Bank, which has spurred a bid for Treasures for most of this week, has been embroiled in a $14 billion legal battle with the US government in connection with the bank's issuance and underwriting of mortgage-backed securities.
Analysts have said the bullish momentum in Treasury prices remained in place given geopolitical tensions and political uncertainty.
For instance, there is tension in India, which on Thursday said it conducted "surgical strikes" on suspected militants preparing to infiltrate from Pakistan-ruled Kashmir, making its first direct military response to an attack on an army base it blames on Pakistan and raising the risk of escalation.
Then there is the upcoming US presidential election. Any indication that Republican candidate Donald Trump is gaining momentum heading into the election could inject uncertainty into the market and boost Treasury prices, said Mike Materasso, co-chair of Franklin Templeton's fixed income policy committee in New York.
In late trading, US benchmark 10-year Treasury notes were up 21/32 in price for a yield of 1.558 percent, down from 1.567 percent late on Wednesday.
US 30-year bonds rose 7/32 in price, yielding 2.277 percent, down from Wednesday's 2.288 percent.
On the front end of the curve, US two-year notes were flat in price for a yield of 0.742 percent, down from 0.754 percent on Wednesday.
The yield curve has also steepened, suggesting global uncertainty and the upcoming US election will keep the Federal Reserve on hold for now and prevent investors from buying the front end.
The spread between five-year and 30-year yields widened to 116 basis points on Thursday.
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