Bond Report: Treasurys gain as investors dump stocks, oil
SAN FRANCISCO (MarketWatch) — Treasury prices gained Friday, sending yields on U.S. debt lower, as worries about Dubai World’s debt problems sent investors scurrying to unload bets on stocks and commodities and into assets perceived as more stable.
The yield on the 10-year Treasury note fell 4 basis points to 3.23%, while the yield on the 2-year note dropped 3 basis points to 0.71%. Trading was expected to be thin following the Thursday U.S. market holiday.
State-controlled Dubai World, Dubai’s largest corporate entity, late Wednesday asked creditors for a six-month stay on debt repayments.
Yields, which move in the opposite direction of bond prices, had been down more earlier ahead of the U.S. stock market open.
U.S. stocks fell in early trading, following flat to modest losses in Europe and drops on Asian exchanges.
The S&P 500 was down 2.1% at 1,087, while the Dow Jones Industrial Average lost 188 points to 10,276. Gold and oil futures fell.
The dollar rebounded Thursday and continued to climb in Friday’s foreign-exchange trading, while the Japanese yen soared on safe-haven buying. See Currencies.
Russell Jones, head of fixed-income and currency strategy research at RBC Capital Markets, noted that the rally in Treasurys remained within the market’s recent range and that additional bad news would likely be needed to sustain further gains.
“Our strategy for a long time has been to tell investors to lighten on their positions if you get below 3 one hour payday loans.25% on the 10-year — and we are — just as we’ve been telling them to buy into the market when you get north of 3.75%,” he said.
Jones said the potential damage to the broader world economy from the Dubai situation appears limited. European banks’ exposure to Dubai, for example, is estimated at about $40 billion.
That’s a figure that’s dwarfed by exposure to European write-downs, which run into the hundreds of billions of dollars.
“I don’t think one should get too concerned about the impact of Dubai itself, but I think risk assets are due a correction and this is the beginning of it,” Jones said.
German government bonds, or bunds, posted strong gains on Thursday and Friday, outpacing peripheral euro-zone government bonds on safe-haven buying, strategists said.
“Regarding bond trading today, the environment is again intrinsically bond positive,” wrote strategists at KBC Bank in Brussels. “We didn’t see anything new on the Dubai affair, but it seems that it remains the theme markets are trading on.”
Asian and European stocks had sold off sharply on Thursday, when the news hit global financial markets in earnest.
Bond Report: Treasurys gain as investors dump stocks, oil