Benchmark Treasury 10-year note yields may fall to the lowest level in more than a year in a sharp escalation of turmoil over the downing of a passenger jet by rebels in eastern Ukraine, FTN Financial’s Jim Vogel said.
“We could get down into the low 2.30s conceivably, with a move back to 2.65 once the market feels that things have moved back to normal,” Vogel, a interest-rate strategist at FTN in Memphis, Tennessee, said in an interview on Bloomberg Radio’s “In the Loop at the Half” with Michael McKee.
U.S. 10-year yields fell one basis point, or 0.01 percentage point, to 2.47 percent in New York today, according to Bloomberg Bond Trader data. They haven’t traded below 2.35 percent since June 2013.
A key factor for U.S. yields is potential disruption of European economic growth by the Ukrainian crisis, as reflected in benchmark German government securities, Vogel said. Yields on 10-year (USGG10YR) bunds, which are a bellwether “through any sort of euro-centric problems,” are closely correlated with longer-term Treasuries, he said.
European foreign ministers are scheduled to meet tomorrow to discuss taking action against Russia for allegedly supplying pro-Russian rebels the missile used to shoot down the Malaysian airliner, killing 298 people.
“We are just totally stuck on a spread of 130 to 135 basis points to German 10-years in terms of the long end of the market,” Vogel said.
The German 10-year debt yielded 1.15 percent today after reaching 1.14 percent on July 18, the lowest in two years.
To contact the reporter on this story: Akin Oyedele in New York at firstname.lastname@example.org