Treasuries See U.S. Falling Over Cliff as Yields Converge

The biggest Treasury rally in five months is underlining market concern that President Barack Obama and House Republicans will fail to avert $607 billion in mandated spending cuts and tax increases starting Jan. 1.

Yields on 10-year Treasuries dropped the most in one day since May to 1.62 percent after Obama’s re-election Nov. 6. A figure below 1.7 percent indicates that investors expect gross domestic product to shrink by 0.3 percent next year as the so-called fiscal cliff takes effect, according to JPMorgan Chase & Co. Rates on longer-term Treasuries have converged with those of non-U.S. government bonds globally, after remaining about 1 percentage point above them in 2011.