Yields flat after touching new highs, on pace for biggest 2-week rise in years

NEW YORK: US Treasury yields touched 2016 highs in early trading on Friday, but retraced those gains and were little changed from late Thursday as markets settled after the whirlwind sell-off since the surprise election of Republican Donald Trump as US president.

Yields on benchmark 10-year notes rose to 2.34 percent, their highest mark since December 2015 and were on pace to post their largest two-week rise since 2009.

Yields on Treasuries of all maturities have registered the largest two-week gains in more than a calendar year - and as long as nearly seven years for the 5-year note - as investors have dumped US government debt since Election Day.

"When we got the Trump victory we saw a sharp rally in Treasuries that was very short-lived and then this massive sell-off," said Ian Lyngen, head of US rates strategy at BMO Capital Markets.

"The sell-off is a function of inflation expectations. It highlights the risks of a move toward protectionism; it highlights a lot of the traditional pro-business GOP platforms."

Trump campaigned on promises to rewrite US free trade agreements, cut taxes and increase federal spending, all of which are expected to increase inflation.

Price action was choppy in Friday's early trading, with prices on most maturities moving between positive and negative territory. "We're in the process of consolidating and establishing a range within this new higher yield environment," Lyngen said. "It's not exciting, but given the magnitude of the move we've seen, this is relatively normal for the Treasury market."

Benchmark 10-year Treasury notes were flat in price to yield 2.283 percent, after earlier touching their highest level since Dec. 4, 2015.

Yields on 2-year notes also rose to new peaks, touching the highest level since Jan. 4. But they largely retraced those gains and were little moved in price from late Thursday, yielding 1.035 percent.

Yields on 30-year bonds edged up to 3.05 percent, just below their 2016 high, but surrendered most of those gains to trade flat on the day. The early moves higher in yield for Treasuries moved the gap between US and German 10-year government bonds to 203 basis points, near the highest level on record, according to Tradeweb data.