NEW YORK: US Treasuries prices rose on Thursday and the yield curve flattened, with U.S. government debt set to end the year on a more positive note than many investors expected.
The Bank of America Merrill Lynch U.S. Treasury Index was up 0.646 percent year-to-date while the SPDR High Yield Bond ETF was down over 12 percent for the year. In the previous year Treasuries returned 4.95 percent while long bonds returned 27.23 percent, according to Barclays data.
"Treasuries really didn't perform that badly this year, especially given that it was a Fed hiking year and they're still up a bit," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.
Prices had jumped early in the year after slower-than-expected economic growth fueled speculation that the Federal Reserve would delay raising interest rates.
"We saw an overdone rally at the end of January led by currency fluctuations, the breadth of quantitative easing from the ECB and a very weak GDP number," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee.
Speculation about when the U.S. central bank would hike rates drove the fluctuation in yields throughout the year, with news of currency devaluation of the Chinese yuan driving investors to seek equities over U.S. government debt.
"One of the biggest events of the year was the big selloff in Treasuries in June which no one understood at the time, but then there was a realization that China's economy would not react to policy change right away," said Vogel.
The two-year note was last up 2/32 in price to yield 1.047 percent, down from 1.079 percent on Wednesday. The yield had reached 1.103 percent on Tuesday, its highest since April 2010.
"The two-year Treasury note has doubled its yield from the start of 2015 and we think there'll be continued pressure on the short-intermediate end of the curve," said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management in Kansas City, Missouri.
Benchmark 10-year U.S. Treasury notes were last up 10/32 in price to yield 2.273 percent, down from 2.305 percent late on Tuesday.
The U.S. 30-year bond was last up 18/32 in price to yield 3.014 percent, down from 3.043 percent late on Tuesday.
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