US treasuries surge on flight to safety bids, dovish Fed
Treasuries rallied on Tuesday, pushing two-year yields to their lowest in a month, due to a combination of demand for safe-haven assets amid ongoing violence in the Middle East and dovish Federal Reserve remarks that suggested the central bank may be done raising interest rates.
Cash Treasury markets had been closed for a holiday on Monday, so Tuesday morning was traders' first chance to react to Palestinian militants' attack on Israel over the weekend as well as Fed officials' overnight comments.
Benchmark 10-year yields were on track for their largest daily drop since July, while those on the two-year were on pace for the biggest daily decline since late August.
«We had dovish statements yesterday by Fed officials and then you have flight to safety here from the tragic events in Israel. So people are being a little bit of cautious here,» said Stan Shipley, managing director and macro research analyst at Evercore ISI in New York.
«We probably have seen the peak in rates here as seasonal factors are favorable for lower rates in November and December.
We think there's going to be recession 2024 and of course you have this flight to safety,» Shipley added.
Israel pounded the Gaza Strip on Tuesday with the fiercest air strikes in its 75-year conflict with the Palestinians, razing whole districts to dust despite a threat from Hamas militants to execute a captive for each home hit.
In late morning trading, U.S. 10-year yields fell to one-week lows and were last down 10.6 basis points (bps) at 4.676%.
U.S.
30-year bond yields slid 7.5 bps to 4.867%.
U.S. two-year yields, which tend to reflect interest rate expectations, dropped 11.1 bps to 4.967%, after earlier falling to a one-month trough of 4.926%.
Yields fall when
