Treasuries Yield Curve Steepens After Mixed Long-Bond Auction

  • Yield on 30-year bonds rebounded on soft appetite at offering
  • Fed’s Kaplan sees debate this year on shrinking balance sheet

Is the Trump Reflation Trade Over?

The yield curve widened the most this year as investors showed a lack of enthusiasm at the Treasury’s $12 billion 30-year bond auction.

Direct bidders, including mutual funds and pension funds that place bids with the Treasury, bought 4.5 percent, the least since 2009. Primary dealers took 28.8 percent, up from 26.8 percent in the previous sale of the maturity.

  • Treasuries 10-year notes still headed for first four-week advance since July as investors lose confidence that President-elect Trump’s first priorities will include fiscal stimulus aimed at spurring economic growth.
  • Curve from five to 30 years steepens 2.8 basis points to 109.71 basis points as of about 4:30pm
  • 10-year yield, down one basis point to 2.36 percent, declined as much as 6.7 basis points to lowest since Nov. 30, below its 50-day moving average (2.319%) for the first time since September
  • A bullish head-and-shoulders formation is starting to appear in 10-year yields that projects an opening gap at 2.15%-2.16%, according to Ian Lyngen of BMO Capital Markets
  • Dallas Fed President Robert Kaplan said “we should be debating probably in 2017 how we might begin to let the balance sheet begin to run off.” Kaplan is a voting member
  • Fed Chair Yellen hosts a town hall meeting with educators at 7pm
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