By Ellie Ismailidou, MarketWatch
Treasury prices rose on Monday, pushing yields to their lowest
levels since June 19, as the overwhelming rejection of Greece's
bailout proposal in a dramatic vote Sunday
(http://www.marketwatch.com/story/in-rebuke-to-europe-greeks-vote-resounding-no-to-bailout-terms-2015-07-05)
sparked a flight-to-quality in Treasurys and other government
bonds, considered haven assets.
A rally in bond prices came as European stocks tumbled
(https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQqQIwAA&url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Feuropean-stocks-knocked-down-as-greek-voters-say-no-to-creditors-demands-2015-07-06&ei=LXGaVbOQGIHt-QH12YE4&usg=AFQjCNFk5FIuMQtEjMrBISkSBXFdmlKdLw&sig2=VPh_IQgfaghcD7AieJd-Hg&bvm=bv.96952980,d.cWw)and
U.S. stocks also declined
(http://www.marketwatch.com/story/us-stock-futures-slide-as-grexit-risks-rise-2015-07-06),
Treasurys and eurozone government bonds received a strong bid that
drove yields down across the curve. Bond yields fall when prices
rise, and vice versa.
Particularly in the Treasury market, the combined effect of the
Greek resounding 'no' along with last Thursday's rally fueled by
the U.S. official jobs report
(http://www.marketwatch.com/story/treasury-yields-fall-on-post-jobs-report-rally-2015-07-02),
brought the 10-year Treasury yield down to as low as 2.27%
overnight, from 2.46% Thursday, a day before the close of U.S.
markets in observance of the Fourth of July holiday.
On Tuesday, the reaction to the ISM nonmanufacturing index
(http://www.marketwatch.com/story/ism-services-index-comes-in-at-56-for-june-above-forecast-2015-07-06),
which came in slightly above expectations, was somewhat muted as
Greece remained the focus of the market's rally.
On balance, the yield on the 10-year Treasury declined 11.3
basis points to 2.280%, according to Tradeweb.
The two-year yield fell 4.8 basis points to 0.589% and the yield
on the 30-year Treasury declined 10.9 basis point to 3.084%.
"Expect the 10-year [Treasury] to trade inside the 2.25% to
2.50% range that has held throughout this Greek saga, but we think
a break below 2.25% opens further downside potential to 2.10%,"
Chris Bury, head of U.S. rates sales & trading at Jefferies,
said in a note.
As the euro fell against its main rivals
(https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CCgQFjAD&url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Feuro-falls-against-rivals-as-greek-voters-reject-austerity-demands-2015-07-06&ei=EneaVaWtO8b3-AGVjqrQCw&usg=AFQjCNG-lKR38FGWdUSJmeVF5gP5EMzmsg&sig2=MZTygX-b4vjSungj9kNY7Q&bvm=bv.96952980,d.cWw)
Monday, yields in the eurozone were generally lower, with the yield
on the German 10-year bund down 2.8 basis points to 0.770%.
Conversely, in the so-called eurozone periphery countries,
including Italy, Spain and Portugal, yields were up between nine to
18 basis points.
The yield on 10-year Portuguese bonds rose 21.5 basis points to
3.191%, the 10-year Spanish debt added 14.4 basis points to 2.384%,
while yields on 10-year Italian government paper rose 12.4 basis
points to 2.397%. Greek bonds were closed for trading on regulated
platforms, but according to Tradeweb's indicative prices, the yield
on 10-year bonds surged more than 3.26 percentage points to
18.113%.
Monday's Treasury rally comes ahead of $58 billion in new supply
in three-year, 10-year and 30-year bonds that the market will need
to accommodate starting Tuesday.
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