Bond Rally Stalls as Stocks Gain Ground

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U.S. Treasuries consolidated near the highs Thursday, recovering Wednesday’s losses and taking aim at Tuesday highs. Movements are expected to be held in check ahead of Friday’s employment report, which has seen “whisper” numbers on payrolls creep higher. Participants note that safe-haven buying has been propelled by uncertainty with what are viewed as constantly shifting policy priorities out of Washington. The flight-to-quality bid and technical trade has overshadowed the impact of generally improved data and new issues.

The 30-year has been knocking around the 3.05% level from an overnight high yield/low price near 3.087% and a 3.08% close Wednesday. The 10-year has a slight lead and has been straddling the 2.442% area from an overnight 2.483% low and 2.475% close. The five-year has been working either side of 1.895% versus a 1.9375% low and 1.925% Wednesday. The two-year has stalled near 1.195% against a 1.2245% low and 1.212% close.

The curve trade has been mixed in the wake of the FOMC with the yield spread between the two- and 10-years flattened to near 1.24 plus from a close near 1.26 while the yield differential on the the five- and 30-years has forged a steeper slope near 1.16 from 1.15 plus.

Traders note Treasuries have found some support as Wednesday’s Federal Open Market Committee statement took a Mar.15 rate hike out of play and was deemed less-hawkish than it might have been. The market has been following the upswing in U.K. Gilts and German bunds following a steady but dovish Bank of England policy stance.

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