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TREASURIES-Benchmark yields hit highest since June as market squares Columbus Day trading
October 11, 2016 / 7:06 PM / 9 months ago

TREASURIES-Benchmark yields hit highest since June as market squares Columbus Day trading

3 Min Read

* Monday futures trading, technical positioning push yields
higher
    * 10-year yields hit highest since June jobs report
    * 30-year yields highest since Brexit
    * Longer-dated yields retrace levels as stocks fall

 (Recasts opening, adds Treasury supply, quote, stock market
impact)
    By Dion Rabouin
    NEW YORK, Oct 11 (Reuters) - U.S. Treasury yields rose to a
four-month high on Tuesday in technical trading that squared the
market with a fall in Treasury futures prices the day before
when the cash market for bonds was closed for the Columbus Day
holiday.
    Bonds also faced pressure from $56 billion of supply due
this week, including $24 billion in three-year notes, $20
billion in 10-year notes and $12 billion in 30-year bonds.
    Strategists said Tuesday's move up in yields, with 10-year
notes touching their highest level since June 3, was largely a
catch-up move. While the cash market was closed Monday, Treasury
futures still traded on the Chicago Mercantile Exchange, and the
10-year future price slumped to its lowest since June on
the back of a move in oil prices solidly above $50 and a modest
rally in stocks. 
    When bonds resumed trading on Tuesday, prices gapped lower
to match the futures move, sending yields higher.
    "The higher yields I think are more a result of just a
broader risk-on sentiment that's been gripping markets," said
Aaron Kohli, interest rates strategist at BMO Capital Markets. 
    Yields fell from their highs as stocks trudged lower on
Tuesday with benchmark 10-year Treasury notes last
down 5/32 in price to yield 1.75 percent. Yields on the 10-year
note had risen to 1.78 percent, the highest since an anemic June
U.S. jobs report torpedoed investor bets on a rate hike by the
Fed that month.
    The 30-year Treasury bond was last down 14/32 in
price to yield 2.49 percent. The bond had previously seen yields
rise to 2.51 percent, the highest since June 24, the day after
Britain's surprise vote to exit the European Union.
    The move lower in yields came in concert with sinking U.S.
stocks as the S&P 500 and the Nasdaq were both headed for their
worst day in a month.
    "As the stocks weakened that's when the bonds found a bid,"
said Lou Brien, market strategist at DRW Trading in Chicago.
    Brien also pointed out that yields had rubbed up against
technical positioning levels at the day's highs and found buyers
willing to bet prices would go back up. 
    Treasuries prices move inversely to their yields, meaning as
more buyers drive the price of bonds up, yields fall.        

 (Reporting by Dion Rabouin; Editing by Andrea Ricci and
Alistair Bell)

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