The rise in U.S. Treasury prices is attributed to concerns in the market triggered by Germany's plan to ban short selling, prompting investors to buy U.S. Treasuries as a safe haven.
Reports indicate that Germany plans to introduce new regulations on certain types of short selling of stocks and Eurozone bonds, which has intensified unease in the financial markets, leading investors to flock to U.S. Treasuries for safety.
Earlier, U.S. Treasuries had already rebounded from early losses, as a recently released report showed that inflation levels in the U.S. are moderate, alleviating concerns about rising inflation potentially putting pressure on Treasury prices. Subsequent news about Germany's intention to ban naked short selling further strengthened the upward trend in Treasury prices, as existing concerns over Eurozone debt issues prompted many investors to sell U.S. stocks and euros in favor of safe-haven U.S. dollars and Treasuries.
The yield on the 10-year Treasury note briefly fell to a low of 3.363%, as the euro reached its lowest level against the dollar since April 2006. The yield on the 10-year Treasury note remains above the recent low of 3.26% reached during the sudden drop in the U.S. stock market two weeks ago.
The German Ministry of Finance announced that starting midnight on the 18th, Germany will prohibit naked short selling of stocks from the ten largest financial institutions and euro-denominated government bonds. A spokesperson for the Ministry stated that this ban applies to short selling transactions involving credit default swaps on stocks of Germany's ten largest financial institutions and Eurozone government bonds.
Uncertainty surrounding Eurozone fiscal issues and their potential impact on local economic growth has led to fluctuations in the financial markets over the past few trading days. Bond traders indicate that Treasury prices may continue to fluctuate in the coming weeks, with notable intraday volatility.
As of 4 PM Eastern Time, the 10-year U.S. Treasury rose 25/32, with the yield falling 9.5 basis points to 3.377%; the 30-year Treasury rose 1 16/32, with the yield falling 8.9 basis points to 4.256%. The 2-year Treasury rose 3/32, with the yield falling 4.9 basis points to 0.749%.