US bonds ease as stocks rally

US Treasuries eased, pulling yields up from one-month lows, as rallying stocks damped demand for safe-haven government debt and encouraged profit-taking after recent bond market gains.

The benchmark 10-year Treasury note lost 5/32 in price to yield 3.70 per cent, up from 3.68 per cent late Friday. Earlier in the session, 10-year yields briefly fell to 3.64 per cent, their lowest since December 21.

Bonds usually find the going tough when stocks perform well, and that was especially so yesterday when there were no major data releases to spur trading. Traders also awaited today's announcement of next week's bond auction volumes.

"For the most part we''re looking at stocks this week," said Suvrat Prakash, US interest rate strategist at BNP Paribas in New York. "There's just not much action, there is no top-tier data this week. The main event for Treasuries looks to be Thursday morning with the supply announcement," he added.

Following the closure of US markets on Monday for the Martin Luther King Jr Day holiday, there was little fresh data to offer unique direction to the Treasury market.

Treasuries earlier declined in sympathy with UK gilts on news of stronger-than-expected inflation reading in Britain. However, data on Friday showed US consumer price inflation was tame.

Foreign investors' appetite for US securities rebounded in November, led by heavy demand for long-term Treasuries, indicating that there was still strong demand for safe-haven assets. The 30-year long bond fell 5/32 in price, yielding 4.59 per cent compared with 4.58 per cent on Friday.

Treasuries earlier rose after Republican Scott Brown won a US Senate seat in Massachusetts and vowed to stop health care legislation in Congress, easing concern that the cost of the proposal would lead to bigger debt sales as the government finances its record budget deficit.

Treasuries have returned 0.9 per cent in January, rebounding from December's 2.6 per cent loss.

 

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