Treasuries moved sharply higher during trading on Monday as traders reacted to the outcome of the weekend’s referendum in Greece.
Bond prices showed a substantial increase in early trading and remained firmly positive throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 11.5 basis points to 2.278 percent.
The rally by treasuries came following news that the Greek people voted to reject the austerity measures proposed by the country’s international creditors.
The “no” vote on the referendum has added to recent concerns about Greece leaving the eurozone, a move commonly known as the “Grexit.”
European officials said they respect the Greek voters’ decision but argued that it is now up to the Greek government to come up with a new proposal.
Following the vote, Greek Finance Minister Yanis Varoufakis announced his resignation amid indications that he was unwelcome at meetings of European finance ministers.
William Jackson, Senior Emerging Markets Economist at Capital Economics, said, “The Greek No vote has opened a new chapter in the euro-crisis.”
“From here on, negotiations will be tortuous and the risk of a Greek exit from the euro-zone is high (greater than 50%),” he added.
On the U.S. economic front, the Institute for Supply Management released a report showing that activity in the service sector expanded at a modestly faster rate in the month of June.
The ISM said its non-manufacturing index inched up to 56.0 in June from 55.7 in May, with a reading above 50 indicating growth in the service sector.
Any additional news regarding Greece is likely to be in the spotlight on Tuesday, overshadowing a report on U.S. trade.
The material has been provided by InstaForex Company – www.instaforex.com