Saturday, March 31, 2007

Treasuries roiled by Iran attack report

Treasuries roiled by Bahrain rumours

By Michael Mackenzie, Tony Tassell and Kevin Morrison

Published: March 30 2007 18:10 | Last updated: March 30 2007 18:10

The US Treasury bond market swung wildly on Friday on a report suggesting the US was preparing military action against Iran.

US government bonds, a traditional haven in times of turmoil, soared on a rumour published by the Debkafile website - later denied by the White House - that American citizens in Bahrain had been advised to leave the country.

Bond prices leapt while the yield on the two-year Treasury note plunged to 4.52 per cent from 4.64 per cent as traders reacted to the report. However, yields bounced back after White House officials told new agencies that they were unaware of anything about Americans being told to leave Bahrain.

At mid-afternoon 2-year yield was at 4.58% and 10-year yield was at 4.65%

”You don’t want to go home for the weekend not owning Treasuries,” said Rick Klingman, head of rates trading at ABN Amro.

The yield on the 10-year note fell to 4.61 per cent from 4.67 per cent and was last at 4.63 per cent.

”When you throw something like that out there, you will get a reaction,” said Jim Caron, co-head of global interest rate strategy at Morgan Stanley.

Oil prices also firmed further on the report. West Texas Intermediate spiked to an intra-day high of $66.70 a barrel before sliding back to $66.45 a barrel, still 42 cents up on the day.

US equities were also buffetted. The S&P 500 index fell to an intra-day low of 1,408 before recovering to 1,415.51, down 0.49 per cent on the day.

Copyright The Financial Times Limited 2007

U.S. ready to strike Iran in early April - intelligence source -1 (30/ 03/ 2007)

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