Treasuries Decline After Yields Test Bottom of Range for 2017

  • Ten-year yield can’t sustain break in one-year Fibonacci level
  • Modest increase in all-client Treasury shorts, JPMorgan finds

Treasuries fell, pushing up yields from near the lowest levels of 2017, as traders weighed fading optimism about fiscal stimulus against the risk of Federal Reserve interest-rate increases and potential changes to the central bank’s balance-sheet policy.

The 10-year yield rose about four basis points to 2.36 percent at 4:10 p.m. in New York, after touching 2.31 percent, Bloomberg Bond Trader data show. The yield spread between five- and 30-year Treasuries widened to about 111 basis points.

Research from primary dealers shows views are split about the future shape of the yield curve given the prospect of further rate hikes -- a phenomenon that usually leads to flattening -- while the Trump administration pledges fiscal stimulus that could prompt steepening. The number of short positions increased among clients surveyed by JPMorgan Chase & Co.

  • The minutes of the FOMC’s March meeting set for release Wednesday, potentially advancing the debate around its balance-sheet policy
  • March payrolls, to be released April 7, have historically missed estimates, which may have helped drive earlier gains
  • Buying emerges in TY call options targeting 10-year yield drop of around 35 basis points; 30-year rally stalls at 2.95 percent, where real money has selling interest
  • Weakness across the front end was met by foreign real money looking to fade; have been active buying across 3s over morning session, says New York trader
  • Spreads among eurodollar contracts across whites and reds are breaching key, multimonth levels, driven by flattener trades reflecting expectations for a more shallow 2018 rate hike path, and more aggressive 2017 pace

— With assistance by Edward Bolingbroke

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