LONDON: US 10-year government bond yields hit historic lows in Europe on Monday as worries that Spain may need a full-blown sovereign bailout prompted investors to seek safe haven assets.
Murcia on Sunday became the second Spanish region to say it would tap an 18-billion-euro government programme to keep its finances afloat. The eastern Valencia region said on Friday it needed help and media reported more regions are likely to do the same..
The news overshadowed approval of a bailout for Spain's banking sector, worth up to 100 billion euros, agreed on Friday, which along with fresh austerity measures and looser fiscal targets was aimed at avoiding a full bailout that the euro zone can barely afford.
US 10-year government bond yields were last 4.4 basis points lower on the day at 1.4145 percent, having fallen as low as 1.408 percent. That was its lowest level since the early 1800s, according to data compiled by Reuters.
"You've got a lot of speculation that Spain is going to need a sovereign bailout," one trader said. "Markets are usually illiquid this time of the year, but there's been reasonable volumes in Treasuries so this market feels like it wants to rally."
Supply pressure coming from auctions of a combined $99 billion in two-, five- and seven-year notes later this week is unlikely to put a break on the rally in US Treasuries as euro zone concerns remain the main market driver, the trader said.
Concerns also mounted again over Greece with international lenders scheduled to gather in Athens to discuss the terms of further rescue payments, after its prime minister said the country was now mired in a "Great Depression"..
The domestic picture also looked supportive for Treasuries. Given the poor state of the US economy, investors expect the Federal Reserve to embark on further monetary easing, but so far Chairman Ben Bernanke refrained from sending clear signals that such a move was imminent.
Comments
Comments are closed for this article.