Treasuries Rise Following European Debt on French Election Risk

  • Yields breach Friday’s post-jobs report lows, led by 5-year
  • U.S. 10-year yield touches lowest level since Jan. 24

Mestrallet: Next French Government to Be Pro-Business

Treasuries gained, pushing 10-year yields to the lowest in about two weeks, amid widening euro-zone sovereign spreads and declines for European stocks driven by rising French election risk.

The U.S. 10-year yield was lower by 5 basis points at 2.415 percent at 3:20 p.m. in New York, below its 50-day moving average at 2.445 percent, after declining as much as 6.1 basis points. The German 10-year yield declined 4.1 basis points to 0.37 percent, while the French 10-year yield touched a 16-month high as rivals of former front-runner Francois Fillon jockeyed for advantage.

  • As French 10-year yields rose, the U.S.-French 10-year spread contracted to less than 130 basis points, smallest since July; the French-German spread widened to 77 basis points, widest since November 2012
  • Treasury futures volumes surged on the move above Friday’s highs; about 22k TY (10-year) contracts traded over a 4-minute period
  • Front-end flows included three large eurodollar block buys in Mar18 and Dec18 contracts, says trader based in New York
    • 20,000 EDZ8 at 98.06, 8:22am ET and 10,000 EDZ8 at 98.065, 8:27am ET
    • 17,000 EDH8 at 98.40, 8:15am ET
  • USTs retreated from U.S. morning highs concurrently with bunds, after Belgium announced 7Y, 40Y syndications for near future, subject to market conditions; session highs were reached during U.S. afternoon concurrently with lows for U.S. stocks and JPY advance to highest vs USD since late November
  • 5s30s curve steepened for third straight day, approaching its 200-DMA; quarterly refunding auctions begin Tuesday with $24b 3Y; $23b 10Y Wednesday, $15b 30Y Thursday
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