TREASURIES-US bonds rally on reports Israel strikes Iran

BY Reuters | TREASURY | 04/19/24 02:03 AM EDT

(Updates prices)

SINGAPORE, April 19 (Reuters) - U.S. Treasuries rallied sharply as news reports of an Israeli attack on Iran sent investors into safe assets on Friday.

Benchmark 10-year yields fell as far as 15 basis points to 4.4960%, before steadying around 4.5653% as there was little immediate indication of significant damage.

Two-year yields dipped beneath 4.9% and were last down four bps to 4.9471%. Yields fall when bond prices rise and Treasury bonds are seen as safe because investors trust the U.S. government will honour the coupon and repay the principal.

The moves still leave yields higher for the week, but the heavy selloff in bond markets driven by discomfort about persistent inflation has softened.

Israel launched an attack on Iranian soil, people familiar with the situation told Reuters. Iranian state TV said three drones were destroyed in the night sky over Isfahan.

"It's a haven trade," said Mizuho's chief economist for Asia outside Japan, Vishnu Varathan in Singapore.

"The Treasury move can also be explained because it's not just tactical, it's fear and fear tends to have an impact on growth and demand."

Oil, gold and the dollar rose sharply in other markets on news of the attack, before coming off highs. Ten-year Japanese government bond yields dropped 3.5 bps in their sharpest fall since February. (Reporting by Tom Westbrook Editing by Shri Navaratnam)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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