TREASURIES-Yields fall in light post-holiday trading volume

Credit: REUTERS/DADO RUVIC

By Karen Brettell

NEW YORK, Jan 2 (Reuters) - U.S. Treasury yields fell on Thursday in light post-holiday trading, after longer-dated debt posted its highest yearly returns since 2014.

There were no major market drivers, with benchmark 10-year note yields holding near the top end of their recent range.

Trading volumes were light with many traders and investors away after Wednesday's New Year holiday.

The yield curve between two-year and 10-year notes held just below 36 basis point level reached on Tuesday, which was the steepest since October 2018.

Longer-dated debt gained last year on concerns about low inflation and weak growth as the Federal Reserve cut interest rates three times during the year. Demand for yield, with many bonds in Europe and Japan trading in negative territory, added to its outperformance.

Thirty-year bonds returned 16.34% last year .MERGA30, according to Bank of America Merrill Lynch. Benchmark 10-year notes .MERGA10 returned 8.91% for the year.

Bonds gave up some of their gains in December, however, as risk appetite improved after the United States and China agreed to the first phase of a trade deal.

The 10-year yields US10YT=RR were last at 1.893%. They are holding below the three-month high of 1.973% reached on Nov. 7, but are up from 1.69% at the beginning of December and a three-year low of 1.43% reached on Sept. 3.

Overnight funding markets were stable on Thursday after the Fed’s daily liquidity operations provided the market with adequate funding to get through the crucial year-end period, when there is often a funding squeeze.

January 2 Thursday 9:13AM New York / 1413 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

1.52

1.5512

-0.005

Six-month bills US6MT=RR

1.545

1.583

0.000

Two-year note US2YT=RR

100-30/256

1.565

0.004

Three-year note US3YT=RR

100-22/256

1.595

0.003

Five-year note US5YT=RR

100-96/256

1.6714

-0.012

Seven-year note US7YT=RR

99-164/256

1.8049

-0.018

10-year note US10YT=RR

98-184/256

1.8929

-0.017

30-year bond US30YT=RR

100-84/256

2.3596

-0.017

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

10.75

-1.00

U.S. 3-year dollar swap spread

6.50

-1.25

U.S. 5-year dollar swap spread

3.00

-0.50

U.S. 10-year dollar swap spread

-3.25

-0.25

U.S. 30-year dollar swap spread

-31.25

-1.00

(Editing by David Gregorio)

((karen.brettell@thomsonreuters.com; 646-223-6274))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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