US Treasury yields fall as investors shelter in safe haven bonds

U.S. Treasury yields fell on Wednesday, as investors monitored tensions between the U.S. and North Korea.

The yield on the benchmark 10-year Treasury note hit a six-week low before trading at 2.246 percent at 1:44 p.m. ET, while the yield on the 30-year Treasury bond was lower at 2.824 percent. Bond yields move inversely to prices.

The 5-year Treasury note also hit a low Wednesday, falling to 1.768, its lowest level since June 27.

On Tuesday, U.S. President Donald Trump warned the Asian country about facing "fire and fury" if North Korea delivers more threats against the U.S.

Shortly after this announcement, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S. Pacific territory; Reuters reported citing the North's state-run KCNA.

"I think this boils down to China's reaction," Peter Tchir, Brean Capital, head of macro strategy, said in an email to CNBC. "If we do something with North Korea that causes relationship with China to deteriorate, its bad for markets. Anything else seems likely to be short lived in terms of causing market problems."

Other sovereign bond yields also fell, including on the 10-year German bund.


Treasury yields parred losses following a 10-year note sale that saw weak demand. The Treasury Department auctioned $23 billion in 10-year notes at a high yield of 2.25 percent. The bid-to-cover ratio, an indicator of demand, was 2.23.

Indirect bidders, which include major central banks, were awarded 57.9 percent. Direct bidders, which includes domestic money managers, bought 6.8 percent.

"The 10-year auction today was terrible," wrote Peter Boockvar, managing director at The Lindsey Group. "The bid to cover of 2.23 was well below the 12 month average of 2.44 and the smallest since November. Also of note, dealers got stuck with 35% of the auction, the most since December."

"Bottom line, the results of the two auctions this week are night and day," he continued, referring to Tuesday's three-year Treasury note auction. That auction saw a high yield of 1.520 percent, with a bid-to-cover ratio of 3.13.

U.S. worker productivity rose more than expected in the second quarter. The Labor Department said on Wednesday nonfarm productivity, which measures hourly output per worker, increased at a 0.9 percent annualized rate in the April-June period, according to Reuters.

—CNBC's Jacob Pramuk contributed to this report.

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