BOND REPORT: Treasurys See Buying As Catalan Tensions Resurface

By Sunny Oh Features Dow Jones Newswires

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Treasury prices rose, pulling yields lower, on Thursday after the Spanish government said it would suspend Catalonia's autonomy if the region does not hold off on its independence bid.

How are Treasurys doing?

The benchmark 10-year Treasury yield fell 3 basis points to 2.308%. The 2-year yield slipped 3 basis points to 1.535%, edging away from the 10-year high set on the previous session. While, the 30-year yield dipped 3 basis points to 2.822%. When bond prices rise, yields fall.

What's driving markets?

Treasurys attracted solid appetite as investors flocked into assets perceived as safe like gold and the Japanese yen. Tensions between Spain's central authorities and the Catalan government flared up as Spanish Prime Minister Mariano Rajoy issued an ultimatum, saying he would trigger Article 155 and suspend the region's autonomy if the Catalan government stayed on its current track.

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See: Standoff in Spain intensifies, as government gears up to strip autonomy from Catalonia (http://www.marketwatch.com/story/standoff-in-spain-intensifies-as-government-gears-up-to-strip-autonomy-from-catalonia-2017-10-19)

Investors are concerned a full-blown secession could endanger the viability of the European Union, by encouraging other separatist movements in Europe.

What did market participants say?

"The contagion will be a much broader affair which may bring a second swipe at the very foundations of the European Union," wrote Mark Grant, chief market strategist for Hilltop Securities. "Brexit is bad enough but a second front, which I have labeled "Cat-a-pult," could bring the entire construct to its knees."

What else are on investors' radar?

How did other assets do?

Gold rose $4.00, or 0.3%, at $1,287.10 an ounce. The Japanese yen strengthened against the dollar by 0.4% to $112.531 The Spanish 10-year government bond yield briefly spiked to intraday highs before returning close to break-even levels of 1.611%.

(END) Dow Jones Newswires

October 19, 2017 09:21 ET (13:21 GMT)