Treasuries Extend Post-Fed Rally Into 30-Year Bond Auction

(Bloomberg) -- Treasuries rallied for a 2nd day, pushing yields to the lowest levels successful a week, arsenic investors prepared for an auction of 30-year bonds and the commencement of the Federal Reserve’s purchases of Treasury bills.

Ten-year Treasury yields slipped astir 3 ground points to 4.12% portion the policy-sensitive two-year output fell to 3.51%. It was an hold of gains that started Wednesday aft Fed Chair Jerome Powell downplayed dissenting votes connected a quarter-point interest-rate cut, and officials said they would commencement buying short-term Treasury securities to easiness strains successful US backing markets.

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A higher-than-expected speechmaking of archetypal jobless claims Thursday underpinned the bid for Treasuries aboriginal successful the New York session, with the merchandise coming successful astatine 236,000 successful the week ended Dec. 6, compared to the 220,000 expected successful Bloomberg’s survey of economists. Later successful the day, the Treasury volition reason this week’s enslaved offerings with a merchantability of $22 cardinal 30-year bonds.

“With the lawsuit hazard posed by the FOMC successful the rearview, it volition beryllium absorbing to spot a snapshot of the request for duration successful the existent macro environment,” said Ian Lyngen, caput of US rates strategy astatine BMO Capital Markets successful New York. “Long enslaved reopening auctions person been reasonably well-received of late.”

What Bloomberg Strategists say...

“A bid of dovish moves by the Federal Reserve astatine Wednesday’s monetary argumentation gathering has prompted enslaved investors to erstwhile again wager connected a soft-landing script that’s reviving the steeper output curve trade. Long-bond proviso Thursday volition adhd to the theme.”

— Alyce Andres, Macro Strategist, Markets Live

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Following the Fed meeting, wealth markets are present pricing a 50% accidental that the US cardinal slope volition present its archetypal quarter-point chopped of 2026 successful March, with a full of 2 reductions seen adjacent twelvemonth — astir connected par with marketplace expectations heading into the decision. The Fed’s economical projections released Wednesday maintained the authoritative forecast for different simplification successful borrowing costs adjacent twelvemonth contempt concerns that policymakers would hew to much hawkish expectations successful the months ahead.

The Fed’s gathering was “universally dovish, successful my mind,” Brij Khurana, a portfolio manager astatine Wellington Management Company, told Bloomberg Radio Thursday. “They’re inactive talking astir cuts for adjacent twelvemonth and that is very, precise antithetic than what’s happening successful the remainder of the world.”