Treasuries Erase Losses as Ukraine, Gaza Bolster Haven Demand

New York (July 22)  Treasuries erased losses as investors monitored reactions to the downed Malaysian airliner in eastern Ukraine and diplomatic efforts to address unrest in the Gaza Strip, fueling demand for refuge assets.

The yield difference between two- and 30-year Treasuries widened from the least in more than a year as a government report showed the annual increase in U.S. consumer prices in June was 2.1 percent, unchanged from the previous month. U.S. debt fell earlier after investors buying U.S. bonds as a haven from unrest in Ukraine and Gaza pushed yields down during the past week, raising concern the securities are approaching levels money managers will find unattractive.

“There’s still a lot of caution and people don’t know how things are going to unfold,” said Carlos Pro, an interest-rate strategist at Credit Suisse Group AG in New York, one of 22 primary dealers that trade with the Federal Reserve. “The trend higher that we envisioned in yields is probably prevented.”

The 30-year yield was little changed at 3.26 percent at 9:10 a.m. New York time, according to Bloomberg Bond Trader data. The 3.375 percent bond due in May 2044 traded at 102 5/32. The yield rose as much as three basis points. It dropped to 3.24 percent yesterday, the lowest level since June 7, 2013.

The consumer price index increased 0.3 percent last month after a 0.4 percent gain the prior month, matching median forecast of 85 economists surveyed by Bloomberg, figures from the Labor Department showed.

Source:  Bloomberg