U.S. Treasuries once again are the go-to asset in Tuesday’s flight to risk, sending yields on the long end to their 2010 lows. And to buy Treasuries you need greenbacks, so the dollar is at a six-month high. But the real connection may be with “Dr. Copper,” so named because it’s said to be the “commodity with a PhD in economics.”
Bill O’Donnell of RBS observes today that China’s slowdown is pounding the copper market, and that copper and the benchmark 10-year Treasury yield “have recently been locked at the hip.” The metal fell to a two-month low, trading down 10 cents, or 3.1%, at $3.19 a pound for July delivery. Meantime, the 10-year note yield hit a three-month low of 3.625%, down sharply from a month ago, when it ran into the 4% ceiling that’s held since last June and the consensus held that Treasury yields had nowhere to go but up.
The real star has been the 30-year bond, whose yield fell to 4.46%, the lowest since mid-December. The exchange-traded fund that tracks the long end of the Treasury market, the iShares Barclays 20+ Year Treas Bond Trust, (TLT), is up 1.2%, at 92.79. Since April 5, TLT is up 6.1%, while the SPDR S&P 500 (SPY) is off 1% over that span.
Worries about the European debt crisis sent the euro tumbling with the CurrencyShares Euro Trust ETF (FXE) trading at a level equivalent to the common currency fetching less than $1.30. Conversely, the U.S. Dollar Index (DXY)closing in on a 12-month high.
So, it seems global investors who are fleeing risk are coming to America.
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