Treasuries Rally as Italy Woes Rock Global Assets: Markets Wrap

Bloomberg.com — Ten-year Treasuries rallied alongside core European bonds as the political crisis in Italy deepened, triggering risk-off trading across many global markets. Losses for the euro mounted and the region’s stocks sold off, while the dollar edged up.

The benchmark U.S. bond yield fell below 2.90 percent for the first time this month, while American equity futures retreated alongside the Stoxx Europe 600 Index. In Asia, the mood was also downbeat. The MSCI Asia Pacific Index dropped as shares of iPhone screen makers tumbled on a report that Apple Inc. is shifting to next-generation technology. The stronger yen left the Topix index of shares with a seventh straight session of declines, the longest losing streak since September 2016.

Political turmoil in Italy and — to a lesser extent — Spain have refreshed memories of the euro zone’s woes of the past decade. Pro- and anti-European forces are at loggerheads in Rome, with another election expected as early as September after parties failed to form a government in the wake of a poll in March.

“These developments are concerning,” Alessio de Longis, a New York-based portfolio manager at Oppenheimer Funds Inc., told Bloomberg Television in regard to Italy’s political landscape. “The market has taken a completely different tone, it no longer believes what the parties are saying. The markets will be really unable to move forward into a different narrative” until the Italian outlook is clearer, he indicated.

Elsewhere, the Turkish lira held most overnight gains after the central bank took steps to simplify its monetary policy. Many Southeast Asian markets were closed for holidays Tuesday, including Singapore, Indonesia, Malaysia and Thailand.