Treasuries outlook: bonds on track for worst month since January 2009

US Treasuries were on track for their worst monthly performance in almost eight years on Friday as investors evaluated how much further the sell-off sparked by the surprise election of Republican Donald Trump as US president has to run. Investors are betting that Trump will adopt policies that increase spending and debt as well as spur growth and inflation, which would erode the value of US bonds.
Even at higher yields, investors are reluctant to buy the debt in case weakness persists, with much uncertainty remaining over the exact policies Trump will pursue. "There are a fair number of people that think we're not there yet, that yields can still move higher," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. "There are a number of people that want to buy in but also don't want to get whipped by the next 25 to 30 basis point selloff."
Benchmark 10-year notes fell 2/32 in price to yield 2.36 percent on Friday. The yields have jumped from about 1.80 percent before Trump's election on November 8. Two-year notes, which are the most sensitive to interest rate increases, yielded 1.14 percent. The yields rose to 1.17 percent in overnight trading, the highest since April 5, 2010. Treasuries were on track for their worst monthly performance since January 2009, according to Bank of America Merrill Lynch's US Treasury index, with a loss of 2.77 percent so far.
Month-end rebalancing before Wednesday may increase some demand for bonds. The Federal Reserve's meeting on December 13-14 will also be closely watched as the US central bank is viewed as highly likely to raise interest rates for the first time this year. Futures traders are pricing in 94 percent chance of a rate hike at the December meeting, according to the CME Group's FedWatch Tool.