Fresh signs of market stress in China drove investors into the safe harbor of government bonds in the U.S., Germany and the U.K. during the first trading day of 2016.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.245% on Monday, down from 2.273% Thursday which was the last trading session in 2015.

When bond yields fall, their prices rise.

The risk aversion comes as global investors continue to grapple with a muddy global growth outlook, punctuated by tepid demand for goods, sluggish economic growth in many large developing nations and the prospect of further interest-rate increases by the Federal Reserve following its first increase in December since 2006.

China’s benchmark stock index tumbled by nearly 7%, causing authorities to halt trading midday. The Chinese currency fell to the lowest level since 2011 in the onshore market, deepening its decline against the dollar over the past month.

The episode reminded investors of China’s stock-market turmoil during the summer of 2015, and China’s decision to devalue its currency in August. Both rattled riskier markets and jolted investors’ sentiment toward global economic growth.

“It was a big risk-off move to start the year,” said Donald Ellenberger, head of multisector strategies at Federated Investors Inc., which had $350 billion in assets under management as of December.


http://www.wsj.com/articles/u-s-government-bonds-boosted-by-haven-demand-1451919859