Treasuries Gain as Fresh Brexit Risk Drives Demand for Haven

  • Advance comes amid record short positions in five-year futures
  • Yield curve is little changed after flattening earlier

Treasuries advanced across maturities after U.K. Prime Minister Theresa May said the country will need a new trading relationship with the European Union after its withdrawal, fostering concern she’ll pull the country out of the single market.

The rally in shorter-dated debt may put some bearish bets at risk. Hedge funds and large speculators boosted short positions in five-year futures to a record 411,000 contracts in the week ended Jan. 3, according to Commodity Futures Trading Commission data.

  • Ten-year yields fall five basis points to 2.37 percent; Gap between five-, 30-year yields little changed, up less than one basis point, after flattening earlier in session
  • Futures volumes were below par as activity remained light throughout the U.S. session; Futures were running at below 60 percent of average 30-day volumes as of 2 p.m.; 10-year contracts were confined to narrow 6-tick trading range
  • Note, bond auctions this week start Tuesday, to include 3Y, 10Y and 30Y
  • U.S. economic calendar this week includes PPI, retail sales and U. of Mich. sentiment
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