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Treasury yields mostly held their ground on Monday, even as the prospect of a U.S.-Iran conflict unsettled investors, with Iran pledging to retaliate after a drone strike on one of their top generals on Friday.
What are Treasurys doing?
The 10-year Treasury yield TMUBMUSD10Y, -0.63% was flat at 1.790%, while the 2-year note rate TMUBMUSD02Y, +1.04% was up 1.8 basis points to 1.543%. The 30-year bond TMUBMUSD30Y, -0.17% edged 0.2 basis point lower to 2.249%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
The U.S. drone strike and killing of Qassem Soleimani, leader of the foreign wing of Iran’s Islamic Revolutionary Guard Corps, has ratcheted tensions in the Middle East. With regional powerhouse Iran promising to launch devastating attacks against the U.S., investors are still trying to gauge the ultimate fallout from Soleimani’s death.
The bearish sentiment in U.S. stock-markets, however, hasn’t appeared to contribute to further buying of government paper. However, futures for the S&P 500 SPX, -0.71% and the Dow Jones Industrial Average DJIA, -0.81% pointed to a negative start for Wall Street, after the major equity indexes rang in record closes on Thursday.
See: U.S.-Iran tensions will spark increased volatility — here’s how to play stocks, fund manager says
Meanwhile, former Fed Chairman Ben Bernanke said the U.S. central bank had enough tools to combat the next recession at the American Economic Association’s annual meeting in San Diego. Bernanke suggested quantitative easing and forward guidance could make up for the lack of room to cut benchmark interest rates.
Read: Fed has the tools it needs to fight the next recession, Bernanke says
What did market participants’ say?
“The absence of new fundamental information on the docket for Monday suggests that focus will remain firmly on the consequences of mounting tensions between the U.S. and Iran. Even if there has been a reluctance to push the rally in Treasuries overnight, equities are poised to take another leg lower,” wrote Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets.
