LONDON/HONG KONG: US Treasury prices jumped on Tuesday, buoyed by investors buying it as a safe haven as concerns over rising radiation levels outside Tokyo sparked panic selling of riskier assets globally.
The benchmark 10-year T-note yield was last 12.8 bps lower on the day at 3.237 percent, not far from a three-month low of 3.207 percent plumbed in Asian trading as share prices tumbled. The 30-year T-bond jumped more than two full points in price to yield 4.424 percent.
"Cash is king and guys are happy to be long this market at the moment," a trader said.
"It's a flight-to-quality bid. We've seen some selling in the five- and ten-year sector but if anything the bid remains and I don't think that's going to fade anytime soon."
June 10-year Treasury futures were last up by just over a point at 121-06.5/32, slightly off a six-week high 121-14.5/32 reached during the worst of a renewed overnight selloff of Japanese shares.
Investors scrambled for the safe harbour of government bonds as they dumped European and Asian equities after a series of explosions at a nuclear power plant sent low levels of radiation towards Tokyo.
US stock futures dropped sharply, with the S&P 500 index down 2.67 percent after Japan's Nikkei index plunged 10.6 percent on the day and was down 16 percent so far this week, suffering the biggest two-day sell off since the 1987 crash.
Two-year T-notes yielded 7.2 bps less than in late New York trade at 0.529 percent, tightening the 2/10-year gap by three bps to 272 bps. Analysts said the Treasury yield curve was likely to steepen at the long-end on speculation that Japan may start selling Treasuries to repatriate funds and cover the costs of the quake and tsunami.
"It really should be a safe-haven steepening of the curve at the long-end particularly, given the case for the Japanese liquidating foreign assets just becomes more compelling by the hour," said Marc Ostwald, strategist at Monument Securities.
Investors are also looking towards the US Federal Reserve meeting later on the day for indicative language concerning its stance on the $600 billion bond-buying program that it began last November, as well as comments on unemployment and the economy.
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