NEW YORK: US Treasury yields eased from multi-year highs on Monday as investors evaluated how many times the US Federal Reserve is likely to raise interest rates next year and covered some short positions ahead of year-end.
Since Donald Trump's surprise election as US President last month, yields have jumped as investors bet that new stimulus will increase growth and inflation.
The Federal Reserve's economic and interest rate outlook at its meeting last Wednesday was also viewed as more hawkish than expected, sending 10-year note yields to more than two-year highs and two-year note yields to their highest levels since 2009.
Fresh economic forecasts showed policymakers shifting their outlook to one of slightly faster growth, lower unemployment and inflation just under the Fed's 2 percent target.
The projected three rate increases next year would be followed by another three increases in both 2018 and 2019 before the rate levels off at a long-run "normal" 3.0 percent.
That is slightly higher than three months ago.
"Everything was expected except for the projection of an additional hike next year, which ratcheted up all of the forward expectations," said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.
Fed Chair Janet Yellen is due to speak later on Monday about the job market.
Traders on Monday were seen as covering some positions as market liquidity is expected to decline heading into the Christmas and New Year holidays.
Commitments of Traders (COT) data indicates that bond investors hold the largest short positions on record, with Monday's rally likely due to some covering these positions, said BMO's Lyngen.
"The notion that we're due for a short covering bounce as we head into year-end is not surprising," Lyngen said.
Benchmark 10-year notes were last up 8/32 in price to yield 2.56 percent, down from 2.60 percent late on Friday.
The yields rose as high as 2.64 percent on Thursday, the highest since September 2014.
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