US Treasuries prices jumped on Tuesday in a rally driven by anxieties about a slowing global economy that knocked 30-year bond yields below 3 percent for the first time since May 2013. Investors who had bet on rising US interest rates scrambled to cover short positions with bond purchases as Treasury yields tumbled, strategists said.
"We have seen speculators cover up their shorts in euro dollars, two-year futures, as well as five-year futures, over the last two weeks," said Natan Magid, strategist at BMO Capital Markets in New York. "We had a short-covering rally." In their first cash-market dealings since Friday, because of the US Columbus Day holiday on Monday, traders boosted prices sharply and took the 30-year to a low yield of 2.929 percent. The long bond were last up 1-18/32 to yield 2.957 percent.
Yields on the benchmark 10-year touched a low of 2.176 percent. Prices later eased and the issue was last yielding 2.20 percent on a 29/32 rise in price. "The early decline was catching up to yesterday, when the cash was closed," said Lou Brien, strategist at DRW Trading in Chicago. "In part, it's the stock market; in part, it's Ebola; in part its the end of QE (the Federal Reserve's bond-buying program)." Wall Street, which was open for business on Monday, appeared on Tuesday to be reversing a three-day losing streak that was the worst in three years for the Standard & Poor's 500 index of major American companies. Prices were last up 0.20 percent.
Concerns the euro zone would fall into recession intensified after a private gauge of German business in October, released earlier on Tuesday, turned negative for the first time in nearly two years. Adding to worries about the euro zone's biggest economy was the German Economy Ministry's cutting of its forecasts for domestic growth to 1.2 percent in 2014 and 1.3 percent in 2015. Yields on the 10-year note may decline further, given that its yield on Tuesday dipped below 2.20 percent, according to Brien.
"That's half way back from the high we made at the end of last year to the low of the entire move down at 1.39," Brien said. "If we should establish ourselves under that, close under it today or during the next few days, that could signal a move down to 2 percent on the 10-year."
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