LONDON: US 10-year Treasury yields traded below the psychologically important level of 2 percent on Monday as concerns over Spain's finances fuelled appetite for safe-haven bonds, but trade was muted before retail sales data.
Ten-year US Treasury yields were steady at 1.99 percent but could fall further below 2 percent as concerns over Spain put investors off riskier assets.
Spanish 10-year yields rose above the important 6 percent level on Monday as concerns over the country's finances risked sparking another flare-up in the euro zone debt crisis. Appetite for the country's debt will be tested on Thursday when Spain issues bonds in the primary market.
"The focus still remains on risk markets, particularly the fiscal concerns in Spain. We have an auction later this week on Thursday, which is clearly keeping investors on the defensive towards Spanish government bonds," Nick Stamenkovic, strategist at RIA Capital Markets said.
"The primary factor driving US government bonds seems to be external rather than domestic," Stamenkovic said. He doubted 10-year yields would move decisively above 2 percent in the near term, unless US data this week was significantly above consensus.
Investors will look to retail sales data for March later in the session to gauge the strength of the US recovery, after patchy recent data raised hopes for a third round of quantitative easing.
One trader expected the market to be range-bound ahead of the figures. But he added: "The market is feeling pretty strong here, we are through 2 percent (on the 10-year yield and) we are not selling off today, so Spain and Italy - more Spain than anything else - is continuing to be the overriding concern," the trader said.
US Federal Reserve officials on Thursday suggested the economy would have to deteriorate for the central bank to consider additional stimulus.
Two-year US government bond yields were little changed at 0.28 percent, while the thirty-year yield was steady at 3.14 percent.
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