Treasuries Trade in Narrowest Range Since Before U.S. Election

  • Benchmark 10-year yield little changed as traders eye ECB
  • U.S. yield curve steepens as long-maturity bonds underperform

Why the Lack of Price Integrity in Bond Markets?

Benchmark 10-year Treasury yields traded in the narrowest range since before the U.S. election as investors shifted focus to the European Central Bank’s meeting this week.

The 10-year U.S. yield fell about one basis point to 2.39 percent at 4:04 p.m. in New York, after holding within a range of 3 basis points, down from a span of 11 basis points Monday. The yield curve steepened as 30-year debt underperformed.

  • Peripheral bonds lead gains for euro-zone debt ahead of Dec. 8 ECB meeting; expectations are that the bank will extend its bond-buying program for at least six months, following the rejection of the Italian constitutional referendum
  • Yield curve has steepened by about nine basis points from Nov. 30 lows, aided by the suggestion that Trump’s administration will pursue ultra-long issuance
  • U.S. factory and durable goods orders in October beat analysts’ expectations.
  • Latest JPMorgan Chase Treasury Client Survey showed biggest net short position since January, a possible indication of limited scope for near-term declines
  • No Fed speakers scheduled until Dec. 16 as the FOMC observes self-imposed media blackout ahead of Dec. 13-14 meeting; market-implied probability is close to 100 percent that fed funds target will rise 25 basis points to a range of 0.5 percent to 0.75 percent
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