Longer-dated debt prices rise, curve flattens

LONDON (BestGrowthStock) – U.S. Treasury prices mostly rose in Europe on Wednesday with stronger demand seen in the 10-year and 30-year part of the curve as investors bet longer-dated yields have more room to fall.

Investors tend to favor longer-dated paper in a weakening economic environment, highlighted by the U.S. Federal Reserve last week, as inflation should not be a problem. Inflation tends to erode the value of bonds over time.

“Real money buyers from Asia are coming in and buying the belly of the Treasury curve. I’m also hearing some Middle East selling of 2s versus 5s so putting some money out the curve a little bit,” a bond trader said.

The benchmark 10-year note rose 9/32 in price to yield 2.609 percent versus 2.629 percent on Tuesday and within sight of a 7-month low of 2.563 percent set on Monday.

The two-year note eased 1/32 in price to yield 0.512 percent, flattening the two/10-year yield curve to 210 bps from 213 bps on Tuesday.

Thirty-year notes gained 17/32 to yield 3.741 percent, down from 3.761 percent on Tuesday. September T-note futures rose 6/32 to 125-27/32.

The spread between the 10- and 30-year Treasury yields were little changed on the day at around 113 bps but the curve has flattened about 10 bps from a record high near 124 bps reached last week.

(Reporting by Ian Chua; editing by Stephen Nisbet)

Longer-dated debt prices rise, curve flattens