Selling exhausted, Treasuries move higher

By Ellen Freilich

NEW YORK (BestGrowthStock) – Treasuries rebounded on Monday after a sell-off sent yields to their highest levels in six months, high enough to attract investors.

Concerns that a tax deal between President Barack Obama and Republican lawmakers would widen the federal budget gap hurt bonds last week, as did the view that the stimulus provided by extended tax cuts would add to the economy’s growth.

But a 10-year yield above 3.375 percent, a 62 retracement of its May to December move, drew buyers.

“The market was oversold,” said John Spinello, chief fixed-income technical strategist at Jefferies & Co in New York, referring to the sharp retreat in prices and rise in Treasury yields that occurred last week.

The mid-session turnaround got a kickstart when the Federal reserve bought $7.790 billion in Treasuries maturing in 2016 and 2017. Those purchases boosted prices of maturities near that part of the yield curve higher.

The buying soon spread across the curve, pulling prices of all Treasuries into the plus column, though seven-year notes still outperformed other maturities.

The seven-year U.S. Treasury note was up 13/32, its yield easing to 2.65 percent from 2.69 percent on Friday.

Benchmark U.S. 10-year Treasury notes rose 10/32, their yields falling to 3.29 percent from 3.33 percent on Friday.

Reversals of sales bond dealers set up to hedge corporate bond deals they are underwriting this week may also have helped to lift Treasury prices.

The market is also focused on the Federal Reserve meeting set for Tuesday at which the U.S. central bank is expected to continue a policy of monetary accommodation to steer the economy away from deflation and foster employment.

Treasury yields are in a swirl of cross-currents a day ahead of the Federal Reserve’s December policy meeting. The U.S. central bank’s $600 billion stimulus plan was supposed to lower interest rates. But President Barack Obama’s tax deal with Republicans has pushed yields higher because it will likely stimulate economic growth,

Benchmark U.S. yields are now near six-month highs.

(Editing by )

Selling exhausted, Treasuries move higher