Treasury yields languish at three-week lows on Deutsche Bank crisis

Treasury yields trade at three-week lows in Asia as investors fear the Deutsche Bank crisis could turn out to be Europe’s ‘Lehman moment’.

At the time of writing, the 10-yr yield was trading at 1.546%, its weakest since September 8. The 2-yr yield, which represents short-term rate hike bets, traded around 0.726%.

Fears of Banking crisis in Europe gripped markets after German Chancellor Angela Merkel ruled out state aid. Moreover, such fears risk spreading to US and thus take Fed away from the next rate hike.

Consequently, treasury yields dropped (prices rose). Moreover, bond markets are not buying the reports published in German newspaper Die Zeit that government is planning to buy a 25% stake in case the situation worsens.

Earlier this week, we also saw Deutsche Bank head refuse capital shortage. However, bond yields refuse to rise, suggesting more bad news is yet to come.