US bonds extend rally in holiday shortened session
Bond rally continues amid thin trading
Closely watched 2/10 yield curve flattens
Two-year yields end the month roughly where they started it
Updates for market close
By Davide Barbuscia
NEW YORK, Nov 29 (Reuters) -U.S. Treasury yields dropped amid thin trading during the holiday-shortened market session on Friday, extending a weekly bond rally spurred by optimism about the new U.S. Treasury secretary and some respite from inflation concerns.
Benchmark 10-year yields dipped to an over one-month low, while two- and thirty-year yields hit their lowest in over threeweeks, partly because of holiday-week effects after Thanksgiving on Thursday as well as month-end investor flows.
"Month-end positioning is likely to be playing a role, particularly going into the long U.S. Thanksgiving weekend, which is likely to have led to some increased demand for Treasuries," said David Page, head of macroeconomic research at AXA Investment Managers.
The move lower in yields, which decline when prices rise, indicated further unwinding of the trades linked to Donald Trump's win in the US presidential election, which had put downward pressure on bonds in previous weeks because of expectations for higher deficits and inflation during a second Trump presidency.
This week's rally began after Trump named Scott Bessent as Treasury secretary last Friday and gained momentum after a string of well-received Treasury auctions as well as inflation data in line with estimates.
"The nomination of Bessent as U.S. Treasury secretary ... has eased fiscal concerns," said Diana Iovanel, senior markets economist at Capital Economics.
For Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, Trump's selection of Bessent suggested "economic rationality, potentially tempering fears of inflationary policies, possibly with a measured implementation of tariffs."
Benchmark 10-year yields US10YT=RR were last seenat 4.176%, their lowest since Oct. 25. Two-year yields US2YT=RR, which more closely reflect monetary policy expectations, stood at 4.163%, their lowest since Nov. 5.
"It'sbeen a one-way slide lower in yield since the Asia reopen, though light flows have magnified the moves to a degree," analysts at Citi wrote in a note early on Friday.
Since the beginning of November, 10-year yields have declined by about 10 basis points while two-year yields were roughly unchanged by the end of the month. Further out, 30-year yields US30YT=RR have declined by about 11 basis points since the beginning of November to 4.366% on Friday.
The closely watched curve comparing two- and 10-year yields US2US10=TWEB was last at 1.7 basis points, flatter than on Thursday - meaning the premium of long-term yields over shorter-ones was smaller.
That part of the curve inverted earlier this week for the first time in over a month, with two-year yields briefly higher than the 10-year. A curve inversion is a bond market signal of a possible economic contraction in the future.
U.S. stock and bond markets were openfor a half-day on Friday. The sustainability of this week's decline in yields might become clearer once the new month starts next week.
For Page at AXA Investment Managers the weeks ahead will continue to be volatile as speculation mounts over the next U.S administration's policies.
"Bonds look expensive to us at these yields," he said.
US 10-year Treasury yield https://reut.rs/3B0LvYo
Reporting by Davide Barbuscia; editing by Jonathan Oatis and Diane Craft
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
