Azernews.Az

By Bloomberg

Treasuries rose, pushing benchmark yields toward a one-week low, as the threat of a Greek default raised demand for the relative safety of U.S. government securities.

Notes and bonds jumped after the European Commission said talks in Brussels between Greece and its creditors broke up after 45 minutes on Sunday. Lawmakers in Germany, the biggest national contributor to Greek aid, warned the indebted country is at risk of dropping out of the euro currency bloc.

“This atmosphere helps the Treasury market,” said Hiroki Shimazu, a senior market economist at SMBC Nikko Securities Inc. in Tokyo. “It’s a flight to quality. There’s a higher risk of a Greek exit.”

The benchmark 10-year U.S. yield fell five basis points to 2.35 percent at 6:43 a.m. in London, according to Bloomberg Bond Trader data. The 2.125 percent note due May 2025 rose 14/32, or $4.38 per $1,000 face amount, to 98 2/32.

The yield dropped to 2.33 percent on Friday, the lowest level since June 5.

Greece’s creditors want the nation to raise money through pension cuts and taxes. The government says the demands are economically and politically unacceptable, raising concern the nation will have to exit the euro, what’s known as a Grexit, if it can’t get new funding.

“A Grexit must be factored in if the Greek government doesn’t do what it’s long been called upon to do,” Michael Grosse-Broemer, a member of Chancellor Angela Merkel’s Christian Democratic-led bloc, said in a ZDF television interview on Sunday.

‘Long Lasting’

U.S. 10-year yields will drop below 2 percent if Greece leaves the currency union, said Kim Youngsung, head of overseas investment at South Korea’s Government Employees Pension Service in Seoul.

“If they do not reach a solution, it will be a long- lasting problem,” he said.

Euro area finance ministers are scheduled to meet to discuss Greece’s debt on June 18.

The day before, the Federal Reserve is scheduled to finish a meeting, and any signs that it is preparing to raise interest rates will limit the decline in yields, Kim said.

Treasuries have still lost investors 1.2 percent this month, according to Bloomberg World Bond Indexes, amid speculation the Federal Reserve is moving toward raising interest as the U.S. economy improves. They are down 0.5 percent this year.