BOND REPORT: Treasurys See Buying As Brexit Concerns Stoke Demand For Safe Assets

By Sunny Oh Features Dow Jones Newswires

Treasury prices rose, pulling yields lower, on Monday as geopolitical concerns resurfaced after British Prime Minister Theresa May's tenuous leadership came under attack within her political party.

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What are yields doing?

The 10-year note yield fell 1.6 basis point to 2.381%, versus 2.397% late Friday. The 30-year bond yield dropped 2.5 basis points to 2.852%, from 2.877%. The 2-year note yield was unchanged at 1.658% from last Friday.

What's driving Treasurys?

With little economic data to drive the market's action, Treasurys saw buying after reports that Conservative lawmakers were ready to issue a vote of no confidence against British Prime Minister Theresa May, weakening her already tenuous position and undermining her ability to negotiate a favorable deal for Britain to leave the European Union.

The infighting within the ruling Conservative Party's ranks has fanned uncertainty about the negotiation process, and has stoked buying of assets perceived as safe, like U.S. government paper.

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See: Brexit hardliners are selling England by the pound (http://www.marketwatch.com/story/brexit-hardliners-are-selling-england-by-the-pound-2017-11-09)

But for most, U.S. tax negotiations between the House Republicans (http://www.marketwatch.com/story/house-to-vote-on-its-version-of-tax-bill-this-week-kelly-says-he-doesnt-follow-trumps-tweets-2017-11-13) and their counterparts in the Senate remained key to setting the direction of the market's movement for the week. The wide differences between the tax plans drawn up by the House and the Senate has drawn concerns that a viable tax bill may not see passage by the end of the year.

Read: How much punch will the economy get from tax reform? (http://www.marketwatch.com/story/how-much-punch-will-the-economy-get-from-tax-reform-2017-11-13)

What are market participants saying?

"Sterling is priced for soggy growth and difficult negotiations. Both are likely whoever runs the Conservatives. The weakness of the PM's position, like the incompetence of Mr Bean, is well known. That's before we wonder who would want her job in the current circumstances; and before we wonder what her departure might do to the odds of another election," said Kit Juckes, global head of FX strategy for Societe Generale.

What else is on investor's radar?

What are other assets doing?

Even though the risks originated from British, U.K. government debt, or gilts, attracted flows to push yields lower. The 10-year U.K. government yield fell 3.4 basis points to 1.310%, while the pound weakened 0.3% to $1.310 (http://www.marketwatch.com/story/pound-slides-as-british-government-faces-turmoil-2017-11-13).

Other eurozone bonds followed suit. The German 10-year government bond yield shed 2.1 basis points to 0.392%, while the French 10-year yield lost 2.2 basis points to 0.758%.

(END) Dow Jones Newswires

November 13, 2017 09:04 ET (14:04 GMT)