By Sunny Oh
Treasury yields fell on Friday on the day after the Thanksgiving holiday as the U.S. bond market caught up with the broader rally in European debt, sparked by the extension of COVID-19 restrictions on business and consumer activity.
The U.S. bond market closed early at 2 p.m. ET in line with recommendations from the Securities Industry and Financial Markets Association.
The 10-year Treasury note yield (XTUP:BX:TMUBMUSD10Y) fell 3.7 basis points to 0.841%, while the 2-year note rate (XTUP:BX:TMUBMUSD02Y) was down 0.6 basis point to 0.154%. The 30-year bond yield (XTUP:BX:TMUBMUSD30Y) slipped 4.5 basis points to 1.576%.
U.S. Treasury yields followed their European counterparts lower, after news that French and German officials are keep lockdown measures in place beyond their original expiration date.
German Chancellor Angela Merkel said the country’s lockdown would be extended to Dec. 20 while the U.K. government also announced that London would return to tougher restrictions once the national lockdown is lifted on Dec. 2.
The 10-year German government bond yield (XTUP:BX:TMBMKDE-10Y) ended at negative 0.59%, around a three-week low.
The bullish trading in bonds also may have been driven by investors buying longer-dated bonds to maintain the maturities of their overall portfolios before the end of the month.
In addition, investors are eyeing the prospect of the Federal Reserve acting in December. Analysts say a weakening of economic data could force the central bank’s hand and shift its bond purchases toward longer-dated maturities, even as minutes from the November meeting suggest the central bank was leaning toward no action.
“The FOMC discussed updating guidance on asset purchases “fairly soon” at the last meeting but saw no need for “immediate” adjustments. The balance could tip toward more action in December if the incoming labor market and consumption data disappoints,” said Kenneth Broux, an analyst at Société Générale.