Halister News

(Bloomberg) -- U.S. Treasuries may extend their decline as the North Korean tensions look set to abate further while the U.S. economy remains resilient, says Hideki Shibata, senior rates and currencies strategist at Tokai Tokyo Research Center.

• Lack of missile action from North Korea on Saturday prompts investors to unwind their risk-off positions this morning, says Tokyo-based Shibata
  • It’s unlikely that U.S.-proposed sanctions against North Korea will be adopted straight away given Russia’s possible resistance
  • UN resolution could be postponed, and a delay would lead to a less tough sanction, which limits reaction from North Korea and eases risk-off sentiment
• With U.S. economy remaining resilient and Fed on course for monetary policy normalization, a big drop in Treasury 10-year yield below 2% is unlikely as long as there’s no military conflict on Korean peninsula
• A moderate increase in U.S. yields can be expected over medium to long term
• NOTE: Treasuries cheapen across the curve, with 10-year yield up 4bps to 2.09% after dropping to as low as 2.01% Friday
• NOTE: U.S. calls for a vote on Monday on a draft resolution to tighten sanctions on North Korea

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui