LONDON Jan 7 U.S. Treasury yields were steady
on Monday after reaching eight-month highs in the previous week,
as investors bought back in after a sharp sell-off fueled by
expectations of less easy monetary policy this year.
Ten-year U.S. Treasury yields were flat at 1.90
percent after reaching 1.975 percent on Friday - its highest
since late April. Borrowing costs were steady throughout
maturities, with thirty-year yields also little
changed on the day at 3.10 percent.
The move higher in yields last week was driven by minutes
from the Federal Reserve showing officials are increasingly
concerned about the impact of quantitative easing (QE).
Analysts took it to mean the central bank could unwind
ultra-easy monetary policy earlier than expected - a view
reinforced by two top Fed officials suggesting on Friday asset
purchases could be halted this year.
"There was certain degree of inevitability as we started
turning back to more normal volumes (and as) real money
investors returned, that they would look at the back-up in
yields we've had and, being naturally short both of duration and
allocation, they would put some money to work," Marc Ostwald,
strategist at Monument Securities said.
"There is a lot of money still out there from the QE that
we've had," he added.
The rate outlook had brought U.S. Treasury yields to a
higher trading range but ongoing fiscal concerns would likely
limit any bond sell-off, traders said.
While U.S. lawmakers found a temporary solution for the
so-called "fiscal cliff" of tax hikes and spending cuts due to
be automatically triggered early this year, the United States
risks defaulting on its debt if Congress doesn't give the
government permission within a few months to increase borrowing.
"We are at the risk now of negative headlines in the fiscal
cliff," one trader said. "It's far from a done deal, a good
But a bout of supply this week was also expected to limit
gains over the near-term, traders said. The Treasury will offer
three-year notes on Tuesday, 10-year notes on Wednesday and
30-year bonds on Thursday.