US Treasury debt prices rose on Friday as the few traders in for the holiday-shortened session bought longer-dated debt in an effort to square up their books for the year-end. With very little in the way of economic data, no Treasury debt auctions and no Federal Reserve purchasing of Treasuries, yields dipped as some investors moved out the curve to line up their portfolios with their investment benchmarks.
"The one identifiable flow ahead of the holiday weekend is the extension-related demand," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut. Benchmark 10-year Treasury notes were trading 9/32 higher in price to yield 3.33 percent, down from 3.37 percent late Thursday. The current yield compares with a yield of 3.84 percent at the end of 2009, and 2.22 percent at the end of 2008. Benchmark notes are on track for the best yearly performance since 2008.
December was a bit of a rough month for Treasuries, however, with benchmark yields on track for the biggest rise since December, 2009. Yields were also set for the biggest quarterly jump since the second quarter of 2009. Investors have been looking for activity to pick up next week, when the Fed will resume its program of Treasury debt purchases, and with the release of the government's December non-farm payrolls data on Friday.
For the payrolls report, the median of forecasts from analysts polled by Reuters is for employers to have added 126,000 jobs this month after a disappointing rise of only 39,000 jobs in November. The Fed's Treasury purchase program and its expected in the middle of next year could have a big impact on the direction of yields in 2011.
"With QE2 ending in June, it is probably going to be some time in March that people are going to be anticipating that as the first phase of monetary tightening," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts. The US Treasury debt market is scheduled to close early, at 2 pm EST (1900 GMT) on Friday ahead of New Year's Day. Thirty-year bonds were trading 19/32 higher in price to yield 4.39 percent, down from 4.43 percent late Thursday, while two-year notes were 1/32 higher in price with a yield of 0.62 percent.