U.S. Treasury Gains as Investors Fear Greek Collapse

Early today, U.S. Treasury short-term yields were pushed to the lowest levels on record as investors fled from the sinking ship that is Greece’s debt burden and sought refuge in good ‘ole U.S. debt. A drop of 16,000 in jobless claims was also announced for May, housing starts are up from April, and yields on 10-year-notes, which move inversely to prices, fell 1/50th of a percentage point to 2.953%, pushing it up 5/32 in price. The 30-year bond gained 8/32 to yield 4.187%. However, housing starts were still weaker than average, and jobless claims still remain above 400,000.

Still, the situation in the U.S. seems far less bleak when compared to Greece and the issues facing the EU. The euro continues to fall on fears that Europe’s policy makers won’t be successful in creating a new financial aid package to prevent Greece from restructuring and going into default. The euro is currently worth $1.4292 USD, down from $1.4616 from a week ago today.

Investors are waiting to see how a Greek default might affect them, banks around the world, and other indebted countries like Ireland and Portugal that could be the next to collapse. On Wednesday, 10-year yields dropped by the most since December, more than offsetting a spike on Tuesday. And today held onto those gains, with expectations of a drop of 25 basis points before all is said and done. A basis point is 1/100th of a percentage point, meaning bond yields could drop as much as 0.25% from current levels.

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