Treasury sell-off continues on rising yields

12/1, 2:41 PM (Source: TeleTrader.com)

United States government bonds extended losses on Thursday, with longer-dated debt experiencing a significant sell-off following yesterday's comments from president-elect Donald Trump's Treasury secretary pick Steven Mnuchin.

Former Goldman Sachs partner said the incoming administration might extend the maturity of debt in order to lock in lower interest rates, given that the cost of borrowing is likely to rise in the near future and the government would have to finance its considerable fiscal stimulus. At the same time, as markets anticipate increased spending and tax cuts, they start to price in a faster pace of tightening from the Federal Reserve, which, in addition to higher growth prospects, pushes the bond yields further up. Meanwhile, the difference in yields between U.S. bonds and their European equivalents continues to widen on monetary policy divergence, as analysts expect the European Central Bank to extend its quantitative easing program when it meets on December 8.

The yield on 10-year bonds climbed to 2.4045% at 2:24 p.m. CET, while the yield on two-year Treasuries rose to 1.1271%. The yield on 30-year debt surged to 3.064% at the same time. In London, the yield on 10-year gilts jumped to 1.452% at 2:35 p.m. CET, whereas its German equivalent soared to 0.302%.

Teletrader Newsroom / IB