Treasurys Rise on Concerns About North Korea Threats, German Elections

By Daniel Kruger Features Dow Jones Newswires

U.S. government bond prices rose as investors sought safe assets following a fresh escalation of tensions between the U.S. and North Korea and fragmented results in the German elections.

Continue Reading Below

The yield on the benchmark 10-year U.S. Treasury note slipped to 2.220% Monday from 2.262% on Friday, the largest one-day decline since Sept. 7. Yields fall as prices rise.

Demand for Treasurys accelerated after North Korea's foreign minister said the country interpreted a recent remarks from President Trump as a declaration of war and all responses were on the table, which could include shooting down U.S. warplanes. Investors often use U.S. government debt as a relatively safe store of value in times of heightened geopolitical tension.

"The declarations they made today are a little more aggressive than we've seen before," said Larry Milstein, senior managing director at RW Pressprich & Co. in New York. "It ratchets up the fear level."

Investors were also put on edge by German elections, which raised concerns about the possible weakening of Europe's established political parties. Chancellor Angela Merkel's party, the center-right Christian Democrats, garnered the most votes but fell well-short of a majority. The second-place center-left Social Democrats also posted disappointing results, while parties on the far right and left each generated surprisingly strong results.

The outcome is expected to lead to drawn-out negotiations as Merkel tries to form a coalition government, and underscores the potential fragility of Europe's economic resurgence.

Continue Reading Below

"Europe is worried about the rising of" extremist parties, said Thomas di Galoma, a managing director at Seaport Global Holdings. "That might give Merkel a little bit of trouble."

The decline in yields follows a recent nine-day string of increases that extended through the Federal Reserve's meeting last week, where the central bank indicated that it may raise short-term rates once more this year. The government is scheduled to hit the market with three auctions this week, with the higher yields likely to lure bidders, traders said.

(END) Dow Jones Newswires

September 25, 2017 16:15 ET (20:15 GMT)