US Treasury yields were little changed on Friday as expectations the Federal Reserve would raise US interest rates by year-end offset demand for bonds following comments by European Central Bank President Mario Draghi on bond purchases. Trading held in a narrow range on light volume in the absence of major economic data and moves in other markets.
On Thursday, Draghi said there was no discussion at the ECB's latest policy meeting on possible changes to its 1 trillion-plus euro bond purchase program. Any discussion on ECB policy would occur at its December 8th meeting. Draghi's remarks after an ECB policy meeting pushed against speculation the central bank may begin paring its monthly bond purchases with its stimulus program possibly ending as early as March 2017.
Concerns about reduced ECB purchases had spurred selling in longer-dated Treasuries, propelling their yields to four-month highs earlier this week. Positive technical signals, including the spread between five-year and 30-year yields holding below its 200-day moving average, also underpinned support for longer-dated Treasuries, traders and analysts said. Dealers' exit from hedges on this week's some $28 billion in investment-grade corporate bonds briefly added to purchases of longer-dated government debt, they said.
Benchmark 10-year Treasury notes were up 2/32 in price to yield 1.738 percent, down less than 1 basis point from late Thursday. It reached a four-month peak at 1.841 percent on Monday. The spread between US five-year and 30-year yields earlier narrowed by 2 basis points before ending little changed on the day at 125 basis points. Shorter-dated yields were marginally higher on expectations the Fed would raise interest rates at its December 13-14 meeting. Interest rates futures implied traders saw about a 70 percent chance the US central bank would raise rates in December, according to CME Group's FedWatch program.
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