TREASURIES-U.S. Treasury yields drop in European lockdown bond rally

BY Reuters | TREASURY | 11/19/21 05:52 AM EST

Nov 19 (Reuters) - U.S. Treasury yields fell on Friday, dragged down as lockdown fears in the euro area sent sovereign bond yields tumbling across the region.

Germany's health minister said a lockdown, including vaccinated people, could not be ruled out. Austria said it will reimpose a full lockdown next week and require its entire population to be vaccinated as of February.

Europe has become the epicentre of the pandemic again in recent weeks. Markets, which had been relatively calm despite the outbreak so far, moved sharply on the news -- sending Germany's entire yield curve back into negative territory for the first time since August.

With British gilt yields also dropping sharply, U.S. Treasury yields headed lower reversed an earlier rise.

The 10-year Treasury yield was down nearly 3 bps to 1.55% by 1050 GMT.

Other segments of the yield curve moved similarly, leaving the yield curve mostly unmoved on the day.

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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