US treasury yields continue the retreat in Asia

Treasury yields extended the NY session retreat as markets reconsider the possibility of Fed rate hike this year following the release of a disappointing US productivity report.

The benchmark 10-yr treasury yield was last seen trading one basis point lower at 1.535%. The 2-yr yield, which represents short-term rate hike bets, was down 1.2 basis points at 0.702%.

Yield dropped sharply in the NY session yesterday after report hit the wires that hourly output of workers fell 0.5% annualized in the second quarter. The prior two quarters saw declines of 0.6% and 2.4% respectively.

Drop in productivity means less room for further wage growth. Markets believe this would be enough for Fed to delay the rate hike.

The demand for treasuries was also boosted by news the Bank of England fell 52 million pounds short of its target to buy long-dated government debt.