Treasury Yields Increase as Budget Talks Continue
Treasury 10 year note yields increased for the third straight week as lawmakers try to find the solution to the budget deficit. This dampened the demand for US government debt. The benchmark yields dropped yesterday after House Speaker John Boehner scrapped his plan that would increase taxes on income over $1 million.
If a deal is not reached before the year ends, $600 billion of spending cuts and tax increases would take effect. This could send the nation into another recession even if the economy is improving at present. According to a report released January 4, the US gained 140,000 jobs in December.
The US 10 year yield increased six basis points or 0.06 percentage point to 1.76 percent this week in New York. The yield dropped three basis points yesterday to trim the increase. The price of the 1.625 percent note due in November 2022 went down 17/32 or $5.31 per $1,000 face value to 98 3/4.
30 year yields closed seven basis points higher at 2.93 percent after a drop of 5 basis points. They reached 3.03 percent, which is the highest level since September 17.
Treasuries have so far returned 1.8 percent this year, which is the worst annual performance since a 3.7 percent drop in 2009. US government securities lost 0.4 percent this quarter and 0.8 percent in December.
Hedge fund managers and other large quantity investors decreased their long term forecast in 10 year note futures in the week ended December 18. Speculative long positions outnumbered short positions by 67,142 contracts on the Chicago Board of Trade. This was the least amount since August. Net long positions dropped by 69,837 contracts or 51 percent from the previous week. This was the largest weekly drop since March according to the Washington-based commission.
Large speculators added their net long bets on two year note futures in the same period. Long positions outnumber short positions by 168,622 contracts on the Chicago Board of Trade. This was the most since August.