Published January 13, 2015
U.S. Treasuries rose early Monday after a two-week long sell-off pushed yields on benchmark 10-year notes to finish above 5 percent on Friday for the first time since August.
``It looks like there was a buyer of 10-years this morning and the market has done better on it,'' said Drew Forbes, a trader at Daiwa Securities America Inc.
Forbes said a sharp, two-week long sell-off had purged a lot of speculative long positions from the market.
With 10-year yields now about 300 basis points above the 2 percent cost of carry, people are at least willing to look at the possibility of buying, Forbes said.
``It looks like there could be a more of a two-way trade here,'' he said.
Early dealings were narrow-ranged trade following small gains in London where traders were said to have become a bit more cautious about prospects for economic recovery after investors have spent two weeks unwinding safe haven positions in government debt based on a rebound in retail sales in October and the progress of the war in Afghanistan.
Michael Wallace, senior market strategist at Standard & Poor's MMS, said Treasuries appeared to be grasping for support after the pre-holiday sell-off. The market was closed on Thursday for the Thanksgiving Day holiday last week and had shortened trading hours on the two days bracketing the holiday.
Wallace said the market needed to assess whether some better economic data in October was a sign of an economic recovery or just a bounce back from September.
``The markets are extrapolating trends based on a strange spasm in September and October,'' Wallace said. ``We need more data and some confirmation of recovery before we write off bonds altogether.''
Wallace said the Conference Board's consumer confidence index for November, due on Tuesday, could offer the market some direction.
Analysts forecast a rise in confidence to 87.9 from October's 85.5, following a reading of 97.0 for September.
``Stability in the consumer confidence reading would be good for equities, but not necessarily for Treasuries,'' he said.
No economic data are due on Monday, but several other economic reports of interest are due later this week. U.S. gross domestic product data, due on Friday, is expected to show the economy contracted by 0.9 percent in the third quarter after a 0.4 percent decline in the second quarter, according to economists polled by Reuters.
At 8 a.m. EST, two-year Treasury notes (US2YT-RR) were unchanged at 99-7/32, yielding 3.17 percent. Five-year notes (US5YT-RR) were up 3/32 at 96-6/32, yielding 4.36 percent.
Benchmark 10-year notes (US10YT-RR) were up 7/32 at 100-4/32, yielding 4.98 percent.
Thirty-year bonds (US30YT-RR) were up 12/32 at 100-10/32, yielding 5.35 percent.