Treasury prices rallied on Tuesday, pushing yields lower, as geopolitical concerns draw money flows into U.S. government bonds.
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Yields for 10-year Treasury notes slipped 3.8 basis points to 2.210% in early Tuesday trading, heading back toward the November lows reached on Monday.
Yields for the 2-year note fell 1.6 basis points to 1.181%, while yields for 30-year bonds , also known as the long bond, fell 3.8 basis points to 2.872%.
Foreign investors like Japanese life insurers piled into Treasuries, which can serve as a hedge against geopolitical turmoil. Despite yields falling lower, making U.S. government paper more expensive, investors have sought out havens where they can shelter from a French Presidential Election that has become tighter going into the first round slated for April 23.
French presidential candidate Marine Le Pen, has threatened to declare a referendum to take France out of the European Union. Following Britain's decision to declare Article 50 of the Lisbon Treaty, a successful popular vote to leave the EU in France could spell the end of the economic bloc.
"The Treasury market is still well bid and will mostly likely remain so going into the French elections this weekend," wrote Tom di Galoma, a managing director at Seaport Global Securities, in a note.
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Later in the early morning hours, yields dipped and rallied after rumors that the British Prime Minister Theresa May would step down due to health concerns, sparking a momentary flight-to-quality, gave way to her announcement that she would call a snap election on June 8, a gambit that sees her trying to consolidate political gains to strengthen her bargaining hand before she returns to the negotiating table to secure a trade deal with the EU.
Yields for 10-year U.K. government bonds, or gilts, held firm at 1.047%. German 10-year bond yields fell 0.8 basis points to 0.183%.
On the economic data front, housing starts fell to 1.22 million, missing the 1.24 million forecasted by Marketwatch's survey of economists. But the March number was 9.2% higher than during the same period last year. The indicator is a gauge of economic strength and a strong housing boom or slump can have knock-on effects for the commodities, manufacturing and real estate sector.
Industrial production gained 0.5% in March, but less than the 0.7% expected. The numbers were buoyed by an increased demand for heating as temperatures cooled after an unseasonably warm winter.
See: Housing starts fall 7% but permits pick up the slack in March. (http://www.marketwatch.com/story/housing-starts-fall-7-but-permits-pick-up-the-slack-in-march-2017-04-18)
Kansas City Fed President Esther George, a non-voting member of the central bank's monetary policy setting committee, said she would support a tightening cycle (http://www.marketwatch.com/story/feds-george-says-shes-not-sure-how-markets-will-react-to-balance-sheet-reduction-2017-04-18) despite uncertainty over how markets would react to the Fed's un-winding of its $4.5 billion balance sheet.
(END) Dow Jones Newswires
April 18, 2017 10:07 ET (14:07 GMT)