Treasury yields dip

30 Nov, 2016

US Treasury yields fell on Monday from last week's highs on month-end buying and views that a selloff that followed the surprise US presidential election victory of Donald Trump may have gone too far. Analysts said demand for US government bonds, which typically kicks in toward the end of the month as investors seek to rebalance their portfolios, was supporting prices and pushing down yields.
Traders were also likely buying Treasuries on the view that the selloff, which sent benchmark 10-year yields to a 16-month high of 2.417 percent on November 23 and two-year yields to a 6-1/2-year high of 1.17 percent on Friday, had become overextended, analysts added.
"The selloff has been quite dramatic," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. "It has kind of run ahead of itself." Fueling the selloff were bets that Trump will adopt policies that increase spending and debt as well as spur growth and inflation, all of which would likely erode the value of US bonds. US 10-year Treasuries were last up 14/32 in price to yield 2.3214 percent, from a yield of 2.370 percent late Friday. Two-year notes were last up 1/32 in price to yield 1.1109 percent, from a yield of 1.135 percent late Friday.
Other maturities were also lower in yield, with 30-year yields last down three basis points from late Friday at 2.9851 percent and seven-year yields last down five basis points at 2.1371 percent. "I would say a little bit of it is probably the month-end buying after a very significant move earlier in the month," said Lou Brien, a market strategist at DRW Trading in Chicago. He said weakness in US stocks was also spurring demand for safe-haven Treasuries.
The benchmark S&P 500 stock index was last down 0.33 percent. US Treasuries are on track to fall 2.7 percent in November to mark their worst monthly performance since January 2009, according to Bloomberg Barclays index data. Rajappa of Societe Generale said investors were also bracing for Italy's December 4 referendum on constitutional reform and the December 8 meeting of the European Central Bank. Uncertainty over the outcomes of those events has likely contributed to the pause in the Treasury market's selloff, Rajappa said. Traders are also awaiting Friday's US November jobs report. Economists polled by Reuters expect US employers to have added 175,000 jobs.

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