US Debt in Demand

The US 10-year eased-22bp yesterday (+2.20%) and is little changed in the O/N session. Treasuries again have rallied, extending the longest winning streak in two-years, as renewed concern Greece will default and the European rescue plan will unravel boosted demand for a safer asset class. It is the third consecutive day for the FI asset class to rally, shaving close to -42bp off the benchmark 10-year. Greek Prime Minister Papandreou has called for a referendum and a parliamentary confidence vote. He is risking pushing the country into default if rejected by voters.

The debt market has found further support from global equities plummeting over the last two sessions on growth worries from China. Later today, the market gets to hear from the FOMC and policy makers’ stance on perhaps QE3. With the Euro euphoria not being a solution and the possibility of contagion potentially appearing on the horizon will have product better bid on pullbacks. With reported US domestic data underwhelming has investors wishing to err on the side of caution.

Earlier this week, dealers have been front running the theory that with Japan intervening, because of an overvalued domestic currency, will be expected to translate into official buying in the Treasury market.

U.S. Ten-Years

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