NEW YORK: Traders sent longer-term US Treasury yields lower on Friday as they repositioned for the year's fourth quarter, although Washington's budget battles sent up yields on soon-to-mature debt. The benchmark 10-year yield was down 5 basis points at 1.4771%. It had reached as high as 1.51% overnight but settled despite positive economic data showing US consumer spending increased more than expected in August.
"We've had a bit of a pullback, I think it's more technical than fundamental in nature," said Kevin Flanagan, head of fixed income strategy at WisdomTree Asset Management.
Investors were buying Treasuries after a big sell-off that began Sept. 23 when the US Federal Reserve and European central bankers moved toward higher interest rates, he said.
Flanagan and others described the high-stakes budget brawl in Washington as having little effect on the government debt market.
The Democratic-controlled US Congress struggled on Friday to advance President Joe Biden's agenda, with House progressives vowing to block a $1 trillion infrastructure bill without a deal on a larger social spending and climate change bill.
An exception was the market for bills with approaching maturities as Treasury Secretary Janet Yellen has estimated a historic US debt default could occur around Oct. 18 if Congress fails to act.
The yield on a US Treasury bill maturing on Oct. 19 for instance reached as high as 0.15% on Friday and was last at 0.1014%, still more than any prior day since the bill was issued in June.
Fitch Ratings said on Friday the United States' AAA sovereign credit rating could be pressured if federal lawmakers fail to address the debt ceiling in a timely manner.
A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 121 basis points, about the same as Thursday's close.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 2.3 basis points at 0.2657%.