NEW YORK: US Treasury yields rose modestly on Friday with benchmark 10-year yields staying below their nine-month peak as investors moved to the sidelines before Christmas and ahead of next week’s supply of short-to-medium term government debt.
The yield curve, while mildly flatter on the day, was on track for its largest weekly steepening since July after the US Congress approved the most sweeping change in the US tax code in 30 years on Wednesday. The tax plan has stoked expectations of greater business investments and a $1.5 trillion increase to the national debt in the next decade.
“You are seeing pressure (on yields) led by two-years ahead of next week’s supply,” said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
The Treasury Department will sell a combined $88 billion in two-year, five-year and seven-year fixed-rate debt together with $13 billion in two-year floating-rate notes, starting next Tuesday.
The US bond market closed early at 2 p.m. (1900 GMT) and will remain shut on Monday, Christmas Day. Many European markets will stay idle through Tuesday.
“Too many people are out. We are not going to have a lot of people putting on big positions at year-end,” said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle in Minneapolis.
Traders brushed off Friday’s spate of domestic data on durable goods orders, personal spending, new home sales and consumer sentiment. Collectively, these latest figures pointed to a solid pace of economic expansion in the fourth quarter even before corporate and individual tax cuts go into effect in 2018.
The 10-year Treasury yield was 2.486 percent, up 0.3 basis point on the day. It reached a nine-month high of 2.504 percent on Thursday.
Two-year yield ended the week near its nine-year high at 1.895 percent, up nearly 2 basis points from Thursday.
The five-year yield touched 2.254 percent, which was the highest since April 2011, Reuters data showed.
The five-year to 30-year part of the yield curve was over 1 basis point flatter at 58 basis points. It hit 51.9 basis points on Monday which was the flattest since October 2007, Reuters and Tradeweb data showed.
Traders and investors had piled into “curve flattener” bets on expectations the Federal Reserve will raise short-term rates further and long-term inflation would stay tame.
On the week, the gap between five-year and 30-year yields grew by nearly 5 basis points, which was the biggest such move since late July.
Source: Brecorder.com
