U.S., Japanese and Australian bond yields were near the lowest levels in at least two months as tumbling stocks and emerging-market currencies drove demand for the relative safety of government securities.
Treasury 10-year yields, benchmarks for everything from U.S. mortgage rates to borrowing for governments around the world, slid to the lowest level since November yesterday. Data in China and the U.S. showed manufacturing growth in the two biggest economies is slowing. U.S. factory orders probably fell in December, based on a Bloomberg News survey of economists before the report today.
“It’s still a very shaky situation around emerging markets,” said Kei Katayama, a bond investor in Tokyo at Daiwa SB Investments Ltd., which oversees the equivalent of $48.7 billion. The rally in bonds “might have slightly more to run.”
U.S. 10-year notes yielded 2.59 percent as of 7:14 a.m. in London, Bloomberg Bond Trader data show. The 2.75 percent note due in November 2023 changed hands at 101 3/8. The yield dropped to 2.568 percent yesterday, the lowest since Nov. 1.
Japan’s 20-year borrowing cost fell to as low as 1.42 percent, a level not seen since April. Australia’s 10-year yield reached 3.93 percent, the least since October, while the central bank finished a meeting today by leaving its benchmark interest rate at a record low of 2.5 percent.
Japan’s Topix index fell 4.8 percent, the biggest decline in seven months. A Bloomberg customized gaugetracking 20 emerging-market currencies fell to the lowest level since 2009 yesterday.
Treasuries rose yesterday after the Institute for Supply Management’s manufacturing index fell to 51.3 in January, the lowest since May and below the most pessimistic forecast in a Bloomberg survey. It was 56.5 in December.
A Chinese manufacturing gauge slid to a six-month low in January, a report Feb. 1 showed.
Data today may show U.S. factory orders fell 1.8 percent in December from November, based on the Bloomberg survey.
The rally in Treasuries paused after 10-year yields fell this year toward their 200-day moving average of 2.55 percent.
Thirty-year bonds yielded 3.54 percent after falling through the 200-day average of 3.60 percent yesterday. Some traders use the gauge to help determine levels where demand may decrease or increase.
“We’re testing the lower end of the ranges” for yields, said Peter Jolly, the head of research at National Australia Bank Ltd., the nation’s largest bank measured by assets. “I think we’ll find some technical resistance.”
Investors should avoid riskier assets, according to a report today by Credit Agricole CIB. There’s “limited downside for developed market bonds.”
The Bloomberg Global Developed Sovereign Bond Index (BGSV) has climbed 2.1 percent in 2014, versus a 4.6 percent decline in 2013, reflecting demand for safety.