Treasury short-dated yields slip

US Treasury short-dated yields fell from five-month peaks to trade flat on Friday after the Federal Bureau of Investigation said it will investigate additional emails relating to Hillary Clinton's use of a private server. US yields, which move inversely to prices, have been trending higher all day following stronger-than-expected US gross domestic product data for the third quarter and in line with increasing German and British bond yields.
News of the new investigation has pushed investors to the relative safety of bonds. Clinton, the Democratic Party's presidential nominee, is viewed as the "safety" candidate because her election would mean less disruption for the government as current economic policies would be maintained. "It's a flight to quality as stocks erased their gains and we had a big spike in the VIX (volatility) index," said Tom di Galoma, managing director at Seaport Global in New York.
In late trading, US two-year note yields were at 0.856 percent, down from Thursday's 0.884 percent. Two-year yields earlier rose to a five-month high of 0.9 percent. Yields on US three-year, five-year, seven-year notes were also lower on the day, pressured by the Clinton probe. However, benchmark 10-year Treasury notes were down 1/32 in price to yield 1.846 percent, slightly up from 1.843 percent late on Thursday. Earlier, 10-year yields reached five-month highs of 1.879 percent.
US 10-year yields have risen about 24 basis points in October, on track for the most since February last year. US 30-year bonds were 9/32 down in price to yield 2.616 percent, up from Thursday's 2.602 percent. They touched five-month peaks of 2.639 percent earlier on Friday. US 30-year yields, rising nearly 29 basis points this month, are on pace for their biggest monthly gain in 1-1/2 years.
Gains in German and British bonds, as well as data showing the US economy grew at a faster pace than expected, underpinned the long end of the US yield curve. German 10-year bund and UK gilt yields have been on a tear this week, surging to multi-month highs, on a growing view their central banks will either hold off further easing, or in the case of the European Central Bank, slow the pace of bond purchases after the March deadline. With the report of stronger-than-expected GDP growth, rates futures markets are pricing in a 74 percent chance the Federal Reserve will tighten rates at its December policy meeting.