Long-dated Treasury yields sink

US long-dated Treasury yields dropped to one-month lows on Monday, weighed down by growing doubts about the Trump administration's ability to deliver on its campaign promise to bolster the economy. President Donald Trump suffered a major political setback on Friday when fellow Republicans pulled their healthcare plan after years of promising to abolish former President Barack Obama's 2010 health law.
"The recent hiccup on the policy front casts serious doubt on the administration's ability to push forward its ambitious policy agenda," said Bruno Braizinha, interest rates strategist at Societe Generale in New York.
Yields, which move inversely to prices, had soared following Trump's election as President last November on the expectation of more stimulus that could boost inflation and prompt the Federal Reserve to raise interest rates at a faster pace.
But since the Fed raised rates a few weeks ago and stuck to its pace of three rate hikes this year, yields have fallen. US 10-year note yields have declined by a quarter of a percentage point, while that of 30-year bonds have dropped 20 basis points.
Investors now feared that the healthcare bill's defeat augured badly for tax reform.
House Ways and Means Committee Chairman Kevin Brady said his committee had been working on tax reform parallel with the failed healthcare reform push. Brady said the committee plans to move on the tax bill in the spring.
"The reality is that tax reforms are going to take longer than people expected and that will cause some market volatility," said James Athey, investment manager, at Aberdeen Asset Management in London.
In late trading, benchmark 10-year note price gained 8/32 to yield 2.367 percent, down from Friday's 2.4 percent. Yields earlier fell to 2.348 percent, their weakest level in one month.
US 30-year bond prices rose 15/32, yielding 2.976 percent. Earlier, yields slid to 2.96 percent, their lowest since February 28. A decent $26 billion US two-year note auction pushed their yields above the lows. US two-year note yields were at 1.252 percent in the afternoon session, off a one-month trough of 1.228 percent hit earlier on Monday.
The US note priced at 1.261 percent at the auction, lower than the expected yield at the bid deadline, and higher than February's 1.230 percent award rate. Bids totalled $70.9 billion for a 2.73 cover, just below the strong 2.82 last month. Indirect bidders, which consist of foreign central banks, took 53.6 percent versus 49.8 percent previously, and well above the 41.4 percent average.