Derivatives markets concerns impact bond market

Worries about shifts in the derivatives markets trumped possible negative influences from a very strong trade deficit report to send late-morning yields on US Treasury bonds down on Wednesday.

Additionally, the bonds were helped by a continuing perception of them as a safe investment in the wake of the downgrade of General Motors and Ford.

Yields on 5-year bonds had fallen 2.7 basis points to 3.876 percent before Treasury’s sale of $15 billion in new bonds.

Longer-dated bonds felt the effect of a bankruptcy court’s decision to allow United Airlines to transfer its pension responsibilities to the Pension benefit Guaranty Corporation.

30-year bonds saw yields fall 5 basis points to 4.52 percent.

In the UK, gilt prices jumped and yields fell after a Bank of England report that forecast weaker growth of the economy that raised the possibility of cuts in the interest rate by the end of the year.

2-year gilt yields fell nearly 10 basis points to 4.378 percent, 10-year gilt yields were down 6.9 basis points to 4.435 percent, and 30-year yields fell 6.7 basis points to 4.381 percent.

Meanwhile in Japan, yields on 10-year government bonds fell 1.5 basis points to 1.275 percent.

Discuss this in the Finance Markets forums

Story link: Derivatives markets concerns impact bond market