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By Ellie Ismailidou, MarketWatch

Treasury yields fall to lowest level since mid December

Treasury prices surged Monday, pushing yields to their lowest level since mid December, as a global stock-market rout fueled demand for assets perceived as safe, including government bonds.

As stocks were hammered, with the Dow Jones Industrial Average falling over 400 points, (http://www.marketwatch.com/story/us-stocks-set-for-tumble-at-open-as-china-fears-return-2016-01-04) demand for Treasurys rose and yields plummeted in all Treasury maturities.

The yield on the 10-year Treasury note lost 6.8 basis points to 2.207%, its lowest point since Dec. 18, according to Tradeweb. Bond yields fall when prices rise and vice versa.

The yield on the two-year Treasury note fell 3.6 basis points to 1.028%, while the yield on the 30-year Treasury bond was down 6.5 basis points to 2.9484%.

Worries originated in China, where the Shanghai Composite Index slid almost 7% on the back of a weak manufacturing reading (http://www.marketwatch.com/story/chinese-manufacturing-index-slips-as-demand-stalls-2016-01-03). The slide activated a new circuit-breaker system for Chinese stocks, halting trading on the mainland for the rest of the day (http://www.marketwatch.com/story/asian-markets-slide-on-fears-of-stalling-chinese-economy-2016-01-03) (http://www.marketwatch.com/story/asian-markets-slide-on-fears-of-stalling-chinese-economy-2016-01-03)and rekindling fears of a repeat of last August's plunge, when another selloff in China's stock market sparked an unraveling of stocks around the world.

European stocks skidded and Germany's DAX 30 index (DAX)was on track for its worst day since August (http://www.marketwatch.com/story/european-stocks-slammed-lower-by-chinese-market-rout-2016-01-04).

(http://www.marketwatch.com/story/us-stocks-set-for-tumble-at-open-as-china-fears-return-2016-01-04) (http://www.marketwatch.com/story/us-stocks-set-for-tumble-at-open-as-china-fears-return-2016-01-04)"The Treasury market was the clear beneficiary of the flight-to-quality flows," said Ian Lyngen, senior rates strategist at CRT Capital Group, in a note, particularly as traders had "the urgency to establish positions" before Friday's official U.S. jobs report.

Monday's moves mean that "fundamentals began to matter again," said Peter Boockvar, chief market analyst at The Lindsey Group, adding that this is expected "to intensify in 2016 because the crutch of central bank policy, particularly from the [Federal Reserve], is beginning to break."

The weak economic data weren't limited to Chinese manufacturing. In the U.S., the Markit PMI manufacturing index fell Monday to its lowest level since October 2012, while the ISM manufacturing index fell to its lowest reading since the past month of the Great Recession. (http://www.marketwatch.com/story/us-manufacturers-still-struggling-ism-finds-2016-01-04)

But the final eurozone manufacturing purchasing managers index (https://www.markiteconomics.com/Survey/PressRelease.mvc/4fa6a086cb8e4710ba65529c2126f148) showed factories in the currency bloc ended 2015 with the strongest growth since April 2014.

Yields also declined in the eurozone, as stocks got crushed, withe the benchmark 10-year german yield falling 6.7 basis points to 0.566%, its lowest level since Dec. 21.

(END) Dow Jones Newswires

January 04, 2016 11:55 ET (16:55 GMT)

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