US 10-year Treasury yields declined on Friday from a near seven-year high as buyers emerged following a bond market sell-off earlier this week spurred by worries about growing inflation and government borrowing. Some technical indicators suggested the Treasuries market is the most oversold since December.
The multiyear high yields inspired some fund managers to add longer-dated Treasuries this week. "We got more aggressive this week," Jerry Paul, senior vice president of fixed income at ICON Advisers in Denver, said of his purchases of 10-year notes.
Many market players, including Paul, expect Treasury prices would resume their fall, pushing 10-year yields toward 3.25 percent, which was last seen in May 2011. "It's a grind higher in yields," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co in New York. "I think the data are still pretty good. They make people think the economy is doing well."
To be sure, if Wall Street unravels as investors view Treasuries as a compelling alternative to stocks, or a resurgent dollar hurts oil and other commodity prices, that could rekindle a bid for US government bonds, analysts said. If so, the 10-year yield could fall back below 3 percent, they said.
The yield on benchmark 10-year Treasury notes was down 4 basis points at 3.071 percent after touching 3.128 percent in overseas trading, the highest level since July 2011, Reuters data showed. On the week, the 10-year yield was on track to increase about 10 basis points, its biggest weekly gain in a month.
"People are digesting the market move," said Andrew Richman, director of fixed income at SunTrust Advisory Services in Jupiter, Florida. "I think we have another leg up (in yields)." The 2-year Treasury yield was 2 basis points lower at 2.553 percent, pulling back from a nearly decade peak of 2.598 percent reached on Thursday.
The 2-year yield was on course to rise for six straight weeks, which would be the longest such streak since 10 consecutive weeks of increases in the fourth quarter of 2017. The 30-year bond yield touched 3.264 percent earlier Friday, the highest since October 2014. It was on track for its largest weekly rise since early February.
Demand for Treasuries will be tested next week as the Treasury Department is scheduled to sell $99 billion in fixed-rate coupon issues and $16 billion in 2-year floating-rate notes (FRN).
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