US Treasury prices rose on Monday as investors were seen covering short positions heading into year-end, but gave up some gains after Federal Reserve Chair Janet Yellen gave an upbeat view of the jobs market. Yellen did not mention monetary policy in her speech at the University of Baltimore's mid-year commencement, but noted that college graduates were entering the strongest jobs market in nearly a decade.
"There was a surprise factor that she would mention anything that was related to the market or the economy at commencement," said Lou Brien, a market strategist at DRW Trading in Chicago. "People who may have been day trading may have took some profit up there." Yields hit session lows before Yellen's speech after news that the Russian ambassador to Ankara was shot in an attack at an art gallery in the Turkish capital. A spokeswoman for the Russian foreign ministry said he died of his wounds.
Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, said that the news "does seem to coincide with the latest move (in Treasury yields) lower and the intraday high in stocks." US Treasuries are seen as a low-risk asset when there is political or other uncertainty.
Bond prices opened stronger early on Monday as some investors covered short positions heading into the year-end holidays. Commitments of Traders data indicates that bond investors hold the largest short positions on record, said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.
"The notion that we're due for a short-covering bounce as we head into year-end is not surprising," Lyngen said. Benchmark 10-year notes were last up 12/32 in price to yield 2.55 percent, after falling as low as 2.53 percent on news of the shooting in Turkey. The yields are down from 2.60 percent late on Friday.
Yields hit multi-year highs last week after the Fed's economic and interest rate outlook at its meeting on Wednesday was also viewed as more hawkish than expected. Data on Thursday, including the third estimate of third-quarter gross domestic product and personal income and spending, will next be watched for further indications about the strength of the US economy.