Staff of Reuters Read for 2 minutes Reuters, SINGAPORE, July 9 – In Asia on Friday, Treasury prices fell marginally, halting an eight-session rise, as traders profited from a dramatic flattening of yield curves as markets shift from fearing rising inflation to fearing a slowdown in growth. The yield on 10-year U.S. Treasuries climbed as far as 5.1 basis points to 1.3460 percent before settling around 1.3310 percent in Tokyo. Thirty-year rates are now at 1.9606 percent, up 3.5 basis points. The movements dampen a price rise that saw the 10-year yield test important technical levels of 1.25 percent on Thursday. However, they maintain most of the gains, with the 10-year yield down more than 20 basis points in just two weeks. The bond gain came after the Federal Reserve made a hawkish shift, persuading investors that it would take action to keep inflation under control, but the mood has since been tainted by fears that a resurgent coronavirus could stymie or derail the recovery. A stampede out of previously crowded bets on higher long-end rates has also been aided by slightly softer-than-expected US data and surprise signals of relaxation in China. “I believe the market has overshot in terms of yield and is due for a correction,” said Martin Whetton, head of fixed income at Commonwealth Bank in Sydney. “But don’t expect to go back to where we were,” he said. “Too much focus has been placed on inflation, not knowing that by raising front-end rates, you’re instantly lowering long-term inflation.” So far this week, 10-year Treasury rates have fallen 9.9 basis points, the biggest weekly decrease in a month, while two-year yields have fallen 3.3 basis points, the biggest weekly decline in nearly a year. (Tom Westbrook contributed reporting, and Rashmi Aich edited the piece.)/n
Read More
