Prices up on Europe worries, US banks

Prices up on Europe worries, US banks

US Treasury prices gained, pushing yields down for the eighth straight week after JPMorgan surprised markets by admitting heavy losses and as Greece’s political turmoil showed no sign of resolution.

By (Reuters)

Published: Sat 12 May 2012, 3:26 PM

Last updated: Tue 7 Apr 2015, 11:11 AM

JPMorgan Chase & Co’s shock $2 billion loss spurred investors to dump bank stocks and head for U.S. debt, often considered a safe haven.

Europe stoked market jitters. Greece’s politicians failed yet again o n F riday to agree on a new government, sending the country hurtling toward a new vote, with radical leftists leading in the polls and poised to scrap the 130 billion euro bailout that staved off bankruptcy.

“Today there is a flight to safety; Greece is not resolved, Spain is not resolved ... and JPMorgan adds a bit of concern simply because they were assumed to be the well-run bank, and if this sort of thing could happen there, where else could it happen?” said Lou Brien, market strategist with DRW Trading Group in Chicago.

Prices on benchmark 10-year Treasury notes traded up 9/32 to yield 1.843 percent, down from 1.89 percent late Thursday.

Yields on 10-year notes have slid for eight weeks. The failure to break through 1.9 percent this week, coupled with still-high market nervousness, could see yields test resistance at 1.798 percent, noted MacNeil Curry, a technical strategist with Bank of America Merrill Lynch.

The focus on Europe will likely continue next week, but significant data reports in the United States will also draw eyes, said Kevin Cummins, an economist with UBS.

Among the data, consumer prices should show lower energy costs set against higher core prices, he said.

“Apart from volatility with regard to energy prices, we think inflation’s heading higher, not lower,” he said. “That’s in contrast to the Fed’s view.”

The Federal Reserve could in fact raise interest rates as soon as the second half of next year, particularly if the job market improves more quickly than the bank expects, Cummins added.

Thirty-year bonds were yielding 3.017 percent, compared with a high yield of 3.09 percent in a bond auction on Thursday.

Treasury yields hit three-month lows this week in safe-haven buying driven by worries over the European debt crisis and its implications for global growth.

Thirty-year bonds sold at a yield below market expectations in Thursday’s auction as investors bid more aggressively for the U.S. debt.

The auction rounded out $72 billion of new debt sales this week under the Treasury’s quarterly refunding.

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