Long-Dated Treasury Futures Rally in Wake of Debt-Ceiling Accord
- Month-end index rebalancing favors long-maturity Treasuries
- Treasury yields reached highest levels since March on Friday
Treasury futures linked to the 10- to 30-year part of the US government bond market rallied on light volume Monday, as traders looked ahead to an array of supportive factors that could come into play when trading resumes Tuesday after the Memorial Day holiday.
Those include mounting expectations that the Federal Reserve is likely to raise interest rates again in June or July, and forecasts that the passage of a debt-ceiling bill will unleash a deluge of short-term Treasury bill issuance, draining liquidity from markets and potentially denting the performance of risk assets. Also, this week brings a month-end rebalancing of the US Treasury bond index to incorporate large quarterly new issues of 10- and 30-year debt, which may drive demand for those sectors of the market.