2017.10.2001:54:00UTC+00U.S. Yields Slide as Geopolitical Tensions Escalate

U.S. Treasury prices increased, driving down yields after geopolitical tensions in Spain heated up. Meanwhile, reports indicated the President Donald Trump was in favor of Federal Governor Jerome Powell as the next Federal Reserve head.

The benchmark 10-year Treasury yield declined two basis points to 2.323 percent, while the two-year yield declined by a basis point to 1.555 percent, retreating from the 10-year high hit in the prior session. Yield on the 30-year yield fell two basis points to 2.829 percent.

Investors had strong appetite for safe haven assets such as government papers early in the session on the back of rising tensions between Spain's central government officials and the Catalan government as Spanish Prime Minister Mariano Rajoy said he would suspend the region's autonomy if the Catalan government did not drop its bid for independence from Spain.

Markets are worried that a full-blown withdrawal could hurt the viability of the European Union, by stoking separatist movements in Europe.

The decline continued in the afternoon as a report from Politico indicated that Federal Governor Jerome Powell was the top candidate to become the next chief of the U.S. central bank when Chairwoman Janet Yellen's term ends in February 2018. Powell is perceived by traders as a continuity candidate and a person whose views are closely in accordance with Yellen, who is known to be a monetary dove.