TREASURIES-Treasuries prices gain as stocks fall, yield curve flattens
* Hong Kong civil unrest hurts risk assets, helps Treasuries
* 5-yr, 30-yr yield curve flattest since 2009
* Fears over Pimco redemptions increased volatility
By Karen Brettell
NEW YORK, Sept 29 (Reuters) - Treasuries prices gained on
Monday as civil unrest in Hong Kong weighed on global stock
markets, and the yield curve flattened as investors bet that
U.S. economic data would continue to improve.
The gains came as investors waited on Friday's highly
anticipated jobs report for September for further signs that
growth is gaining traction.
Uncertainty around demonstrations in Hong Kong, where
protesters defied volleys of tear gas and police baton charges
to stand firm in the centre of the global financial hub on
Monday, was seen as one driver of demand for bonds. [ID:
nL3N0RU17N]
"There is global uncertainty this morning, you've got some
worrying protests in Hong Kong, overall it's quite thin and the
markets are really waiting for payrolls on Friday," said
Gennadiy Goldberg, an interest rate strategist at TD Securities
in New York.
Benchmark 10-year notes gained 13/32 in price to
yield 2.49 percent, down from 2.54 percent late on Friday.
Thirty-year bonds rose 28/32 in price to yield 3.17
percent, down from 3.22 percent.
Month-end buying may also be adding to Treasuries demand,
while some gains were also seen as giving back weakness from
Friday, when fixed-income markets were weighed down by fears
that bond behemoth Pimco may have to sell assets if redemptions
increase after the departure of co-founder Bill Gross.
Volatility in rates also spiked on Friday on concerns that
Pimco would unwind large positions it has taken that bet on low
volatility.
"The idea was that Pimco has sold a lot of vol and they may
get out of some of those positions," said Ira Jersey, an
interest rate strategist at Credit Suisse (NYSE: CS - news) in New York.
A Credit Suisse index that measures volatility in swaptions
increased to 62 from 58 on Friday, Jersey said. Corporate credit
remained under pressure on Monday.
The yield curve between five-year notes and 30-year bonds
flattened to its lowest level in over five years on Monday as
investors bet that the economy will continue to gain traction.
Data on Monday showed that rising incomes helped American
consumers spend more in August, a positive sign for the U.S.
economy which appears to be shifting into a higher gear.
The five-year, 30-year yield curve flattened
to 140 basis points, down from a high of 146 basis points on
Friday.
(Editing by Chizu Nomiyama)