“Treasuries gained for a second day as an unprecedented levy on bank deposits in Cyprus threatened to reignite the euro region’s debt crisis, boosting demand for the safest assets.
Benchmark 10-year yields fell by the most in three weeks after euro-area finance ministers agreed to tax bank deposits in Cyprus to finance part of a 10 billion-euro ($13 billion) bailout for the nation. Moody’s Investors Service said the levy is negative for bank depositors acrossEurope, while Bill Gross at Pacific Investment Management Co. said it moves “risk-on” trades to the back seat. German bunds and U.K. gilts also gained, with German two-year yields falling below zero for the first time in two months.
“The demand today for safe havens is justified as we just don’t know what the outcome in Cyprus will be,” said Michael Markovich, head of global interest-rate research at Credit Suisse Group AG in Zurich. “We continue to be overweight U.S. Treasuries. Elevated risk aversion should persist in the next few weeks.”
The U.S. 10-year yield fell six basis points, or 0.06 percentage point, to 1.93 percent at 7:01 a.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent note due in February 2023 rose 17/32, or $5.31 per $1,000 face amount, to 100 19/32. The yield dropped as much as nine basis points, the most since Feb. 25.
