Bond rally continues amid tense trading

Closely watched 2/10 yield curve flattens

Two-year yields end the month about where they started

(Updates for market close)

NEW YORK, Nov 29 (Reuters) – U.S. Treasury yields fell amid tense trading in the shortened trading session on Friday, extending a weekly bond rally spurred by optimism over the new US Treasury Secretary and some respite from inflationary concerns.

Benchmark 10-year yields fell to their lowest level in more than a month, while two- and 30-year yields hit their lowest levels in more than three weeks, partly due to the effects of the holiday week after Thanksgiving on Thursday as well as month-end investor flows.

“End-of-month positioning is likely to play a role, particularly as we approach the US Thanksgiving long weekend, which has likely led to increased demand for Treasuries,” said David Page , head of macroeconomic research at AXA Investment Managers.

The drop in yields, which fall when prices rise, indicates a further unwinding of trading linked to Donald Trump’s victory in the US presidential election, which had put downward pressure on bonds in previous weeks due to expectations of rising deficits and inflation in a second period. The Trump presidency.

This week’s rally began after Trump nominated Scott Bessent as Treasury secretary last Friday and gained momentum after a series of well-received Treasury auctions as well as inflation data in line with estimates.

“The nomination of Bessent as US Treasury secretary…has eased fiscal concerns,” said Diana Iovanel, senior markets economist at Capital Economics.

For Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, Trump’s choice of Bessent suggests “economic rationality, potentially tempering fears of inflationary policies, possibly with measured implementation of tariffs.”

Benchmark 10-year yields were last seen at 4.176%, their lowest since October 25. Two-year yields, which more closely reflect monetary policy expectations, stood at 4.163%, their lowest since November 5.

“There has been a decline in yields in one direction since Asia reopened, although small flows have amplified movements to some extent,” Citi analysts wrote in a note Friday morning.

Since the beginning of November, 10-year yields have fallen by about 10 basis points, while two-year yields were virtually unchanged at the end of the month. Furthermore, 30-year yields have fallen by around 11 basis points since early November to reach 4.366% on Friday.

The closely watched curve comparing two- and 10-year yields last settled at 1.7 basis points, flatter than Thursday, meaning the premium of long-term yields over yields in the short term was lower.

That part of the curve inverted earlier this week for the first time in more than a month, with two-year yields briefly higher than ten-year yields. A curve inversion is a signal from the bond market of a possible economic contraction in the future.

U.S. stock and bond markets were open for half a day on Friday. The sustainability of this week’s decline in yields may become clearer once the new month begins next week.

For Page at AXA Investment Managers, the coming weeks will continue to be volatile as speculation intensifies over the policies of the next US administration.

“Bonds look expensive to us at these yields,” he said.

(Reporting by Davide Barbuscia; editing by Jonathan Oatis and Diane Craft)