Investors in U.S. bonds aren’t as confident as some of their European counterparts that Greece can survive its current crisis.
Treasury 10-year note yields dropped to the lowest in more than two weeks as investors sought the world’s safest securities, even as European stock and bond markets gained on optimism that negotiations might produce a deal to keep Greece afloat and in the euro currency. The European Central Bank extended a financial lifeline to Greece before an emergency summit of European leaders next week.
“The only real safe haven out there right now is Treasuries,” said David Keeble, the New York-based head of fixed-income strategy at Credit Agricole SA. “Even for bunds, a breakup scenario isn’t the best thing.”
Benchmark 10-year yields dropped eight basis points, or 0.08 percentage point, to 2.26 percent as of 4:59 p.m. New York time, according to Bloomberg Bond Trader data, touching the lowest level since June 3. The 2.125 percent note due May 2025 rose 21/32, or $6.56 per $1,000 face amount, to 98 26/32.
“It’s all about Greece,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “It’s about worries and fears about Greece. That’s the only thing going on into the weekend. Liquidity is going down.”
Greece’s existing bailout agreement expires on June 30, the same day it’s due to make a payment to the International Monetary Fund. After finance ministers failed to resolve the deadlock over aid on Thursday, Greek Prime Minister Alexis Tsipras said on a visit to Russia that his country can survive its current crisis.
“There’s not a lot of depth in the market right now,” said Jim Combias, New York-based head of Treasury trading at Mizuho Securities USA Inc., one of 22 primary dealers that trade with the Federal Reserve. “It’s a Friday. The big meeting is on Monday. You are not sure whether they will impose capital controls. Who really is going to go and take a big risk today?”
The yield on the 10-year Treasury note dropped 13 basis points this week. U.S. government bonds recorded a second weekly gain that trimmed this month’s losses amid the Greece crisis and expectations the Fed will be gradual in raising interest rates.
“The declining possibility of some type of amicable resolution was what drove Treasury yields lower,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut “That momentum carried over.”
Treasuries have lost investors 0.23 percent this year as of June 18, compounded by a 0.95 percent loss this month, according to Bloomberg U.S. Treasury Bond Index.