U.S. Government Bonds Swing Amid Uncertainty on Europe and Taxes
By Daniel Kruger
U.S. government bonds fluctuated as turmoil in Europe and a mass shooting in Las Vegas led some investors to avoid uncertainty and buy safe assets.
The yield on the benchmark 10-year Treasury note recently fell to 2.325%, from 2.328% Friday, according to Tradeweb. Yields fall when bond prices rise.
Voters in the Spanish province of Catalonia voted by an overwhelming majority to secede in a plebiscite that the central government in Madrid had outlawed as unconstitutional. The turnout represented about 40% of eligible voters in the region, with many opponents of separatism opting to boycott.
Spain had been seen by many investors as having made significant progress after losing favor at the nadir of the European debt crisis. The secession issue is also problematic for other European Union members, as many worry that the Catalan vote may encourage similar movements in the U.K.'s Scotland and Belgium's Flanders.
"It sets up these political considerations that are outside of what the market" typically knows how to value, said Aaron Kohli, an interest-rate strategist at BMO Capital Markets. "It's not clear what the implications of this really are."
Investors also were cautious as reports of a mass shooting in Las Vegas where at least 50 people were killed and 200 wounded led to demand for Treasurys fueled by uncertainty surrounding the event.
Yields had risen as high as 2.371% in overseas trading on momentum stemming from the Republican tax plan, which could stimulate growth and lead to bigger budget deficits. While lowering taxes is more broadly popular than other Republican initiatives this year, U.S. investors are unsure that it will be enacted.
"The administration can talk about tax reform, but getting it through Congress is going to be a battle," said Thomas di Galoma, head of Treasury trading at Seaport Global Holdings.