By Ellie Ismailidou, MarketWatch
Treasury prices finished higher Wednesday for a straight second
trading day, pushing yields lower, as disappointing earnings
releases that weighed on stocks increased demand for safer assets,
like Treasury bonds.
After quarterly reports from Apple Inc. (AAPL) and Microsoft
Corp. (MSFT) disappointed, U.S. stocks extended losses on Wednesday
(http://www.marketwatch.com/story/us-stocks-on-track-to-open-lower-as-drops-by-apple-microsoft-weigh-2015-07-22)and
the Treasury market got a boost.
The yield on the 10-year Treasury declined two basis points to
2.322%, while the yield on the two-year rose two basis points to
0.706%. Meanwhile, the yield on the 30-year bond fell 3.7 basis
points to 3.043%.
Treasury yields fall when prices rise and vice versa.
Positive news from the U.S. housing market, where home prices
rose in May
(http://www.marketwatch.com/story/home-prices-rise-04-in-may-fhfa-2015-07-22-991425)
and existing-home sales rose in June at the fastest pace since 2007
(http://www.marketwatch.com/story/existing-home-sales-rise-32-to-549-million-rate-in-june-fastest-since-2007-2015-07-22),
led to some Treasury selling on Wednesday morning, but overall did
not manage to reverse the bullish trend fueled by the global
risk-off sentiment.
Because the economic calendar is lighter than usual this week,
the influence of earnings and risk-asset performance has been
greater than what typically occurs, analysts said.
Between now and the next Federal Reserve meeting scheduled for
July 29, "there isn't a whole lot of new data for the Fed to
review," Kevin Giddis, head of fixed income capital markets at
Raymond James, said in a note.
While Treasury investors are in a wait-and-see mode, in the rest
of the world "it seems we are coming to the brink of the loose
monetary policy," Brenda Kelly, head analyst at London Capital
Group, said in a note.
Bank of Japan Governor Haruhiko Kuroda warned on Wednesday that
he expected Japan's inflation rate to accelerate and hit the
central bank's 2% target by the first half of 2016, while the Bank
of England is also on inflation-watch and could move to monetary
tightening as early as August.
These events are "putting the kibosh on risk assets", Kelly
said, while falling commodity prices are putting pressures on the
corporate bond market.
(http://www.marketwatch.com/story/falling-oil-prices-add-to-high-yield-bond-markets-long-list-of-woes-2015-07-22)
Meanwhile in the eurozone, sovereign bond yields were mostly
lower ahead of a crucial Greek parliament vote on austerity reforms
(http://www.marketwatch.com/story/greek-austerity-reform-vote-goes-to-assembly-after-passing-at-special-committees-2015-07-22)
demanded by the country's creditors. Formal negotiations on a third
bailout program for Greece can only start once the measures have
legislative approval. Conversely, failure to gain a majority vote
could indicate Autumn elections.
As European equities also moved lower
(https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQqQIwAGoVChMIzZKHzOzuxgIVRjI-Ch3hGwRE&url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Feuropean-stocks-drop-with-tech-shares-under-pressure-2015-07-22&ei=LJuvVc3MFsbk-AHht5CgBA&usg=AFQjCNEVkqDg6J_rjmaEbgaoFK16wPa14w&sig2=U8KBzmFs5ZoIsVheoVJ76g&bvm=bv.98197061,d.cWw),
the yield on the benchmark German 10-year bund declined 2.8 basis
point to 0.699%.
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