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(Bloomberg) — Treasuries rose as investors sought the safest securities following the shootings and bombings in Paris.

U.S. equity index futures declined, with contracts on the Standard & Poor’s 500 Index dropping 0.5 percent, after Europe’s worst terror incident in more than a decade left at least 129 people dead. The bloodshed followed by one day suicide attacks in Beirut, where at least 43 people were killed. After atrocities attributed to terrorists in Europe and the U.S. in recent years, the initial reaction from traders was to buy German bunds, U.K. gilts and Treasuries.
Yet the flight to safety has typically proven short-lived. Gains in government bonds were largely erased within days or weeks as information became available, markets processed the news and no immediate follow-up attacks were experienced. Investigators across Europe on Sunday were racing to piece together exactly how the Nov. 13 assaults in Paris were carried out.

“What happened on Friday in Paris was horrific and it will increase anxiety in the financial markets in terms of what comes next,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “Whatever happens in the markets should prove temporary, but nonetheless it will come through.You could get a rally in the front-end of the Treasury yield curve from an anxiety bid,” he said, referring to the shortest-due securities.

U.S. Treasuries have lost 1.3 percent in the past month, according to Bloomberg World Bond Indexes, amid speculation the Federal Reserve is set to raise interest rates next month for the first time since 2006.

Asia Opening

The yield on benchmark U.S. 10-year Treasuries fell two basis points to 2.25 percent as of 9:09 a.m. in Tokyo, based on Bloomberg Bond Trader data. The price of the 2.25 percent security maturing in November 2025 rose 6/32, or $1.88 per $1,000 face amount, to 100 1/32. German 10-year yields closed last week at 0.56 percent, while those on similar-maturity U.K. gilts were 1.98 percent.

French investigators are trying to locate an additional assailant who may have fled, having arrested at least five individuals in Belgium in connection with the assaults, while attempting to determine if any conspirators entered the continent as a refugee. French fighter jets struck Islamic State targets Sunday in Syria, hitting a command base, according to the Defense Ministry.

Past Experience

“A setback, in response to a political shock of this scale and significance, is likely,” Credit Suisse Group AG analysts Oliver Adler and Joe Prendergast wrote in a note on Sunday.

“Past experiences with terrorist strikes in Europe, including the Madrid bombings in March 2004 and the attacks on U.K. public transport system in July 2005, suggest that the financial-market impact of even the most severe attacks tends to be short-lived. Longer history would suggest that the political and economic effects will determine whether there will be a more prolonged financial-market impact.”

The yield on U.K. 10-year gilts fell eight basis points when London’s transport network was bombed on July 7, 2005, before erasing the decline within two trading days. The pound weakened 0.5 percent, yields on German 10-year bonds slipped four basis points, and those on similar-maturity U.S. Treasuries ended the day down one basis point, erasing almost all of the earlier drop of as much as 14 basis points.

Madrid 2004

Spanish 10-year bond yields declined as much as seven basis points on the day of the Madrid train bombings on March 11, 2004, before ending the day less than two basis points lower. The euro strengthened 1.1 percent, while German 10-year bund yields fell two basis points.

On Sept. 11, 2001, German two-year yields dropped as much as 32 basis points, while U.K. 10-year yields fell as much as seven basis points. Treasuries, one of the financial markets which were closed in the aftermath of the worst terrorist attack on U.S. soil, climbed when they were re-opened on Sept. 13, with the 10-year yield dropping 19 basis points. The yield returned to the level it was on the day before the attacks by mid- November.

Treasuries may not rally as much as they have in the past from various “flight-to-quality events,” said Peter Tchir, head of macro credit strategy in New York at Brean Capital LLC.

“I’d expect a little bit more of a rally from this in German and French debt,” Tchir said. “This event is also a bit unusual because it happened after the markets were largely closed. And we’ve had a whole weekend to digest the news and figure out what is going on. If this occurred during market hours I think you would have seen a much bigger move.”

–With assistance from Wes Goodman.

To contact the reporters on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net; Boris Korby at bkorby1@bloomberg.net Nicholas Reynolds