US 10-year Treasury yield hit 6-week low in Asia

• The 10-year Treasury yield fell to a 6 – week low of 2.88 percent in Asia.
• Italian uncertainty and the drop in oil prices seems to have put a bid under treasury prices.

The yield on the 10-year benchmark US Treasury note fell to 2.88 percent in Asia, its lowest level since April 19, possibly in response to Italian uncertainty and a drop in oil prices.

Italian 10-year government bond yields, which move inversely to price, jumped 22 basis points to a 3.5-year high of 2.67 percent yesterday on fears Italy’s anti-EU parties will likely get a much stronger mandate in fresh elections.

Meanwhile, the 10-year Italy-German yield spread rose to 232 basis points – the highest level since December 2013.

Meanwhile, the pullback in oil prices may have also played a role in pushing the treasury yield down to multi-week lows. West Texas Intermediate (WTI) stood at $72.06 a barrel on May 21 but had declined to $67.88 by the end of trading on May 25. As of writing, WTI is changing hands at $66.78/barrel.

Falling oil prices tend to weigh over inflation expectations and therefore also end up pushing the treasury yields lower.