Investors flee to safety of US bonds after China plunge

US Treasuries advanced for a fourth day yesterday, the longest winning streak since April, as a plunge in Chinese shares supported demand for the relative safety of government debt.

Benchmark Treasury 10-year note yields extended gains after the New York Stock Exchange suspended trading. They touched a one-month low amid Greece’s struggles to stay in the euro bloc.

The selloff in China fuelled declines in some commodity prices, which helped weigh down bond-market inflation forecasts. Futures show traders have pushed back the timing for the Federal Reserve to raise interest rates later this year.

“Investors are on the edge of their seats,” said Thomas di Galoma, head of fixed income rates and credit at ED&F Man Capital Markets in New York. “They have Greece and China to worry about, and now this. This just adds to the concern on the street already.”

US 10-year note yields dropped four basis points to 2.22% in late trade.

Equity trading was halted at the NYSE as the biggest American share venue addressed a computer malfunction and cancelled open orders. They continued to change hands on other venues such as the Nasdaq and Bats Global Markets.

China’s securities regulator banned major shareholders, corporate executives and directors from selling any of their stakes for six months, the latest effort to stop a $3.5tn rout in the nation’s equity market. That’s damping demand for raw materials.

Yesterday, Bloomberg’s Commodity Index touched the lowest level since March.

“China is an immediate problem, and that is a bigger deal that the market has to contend with,” said Guy Haselmann, director of capital-markets strategy with Bank of Nova Scotia in New York.

“Greece is a slow-moving accident with few good outcomes.” European leaders set a Sunday deadline for Greece to accept a rescue, saying otherwise they’ll take the unprecedented step of propelling the country out of the euro.

With the turmoil in China and Greece, traders assign a 58% chance to a rise in interest rates by the end of this year, according to Bloomberg, down from 73% a week ago.