The eve of the year’s end is here—and, as everyone else prepares for the holiday rush, savvy traders are finishing up their last minute exchanges amid the final week of the trading year. Both Treasury notes and bonds are set to see their last round of trades for 2014 this week, and much of the activity in the U.S. bond market took place this past Monday.
Monday, Treasury bonds retreated lower amid the final round of U.S. government bond auctions for the year.
Recent trading saw the benchmark 10-year note yield reach 2.183 percent, higher than Friday’s 2.178 percent yield. Remember: when bond prices fall (or, in this case, retreat), their yields rise.
Early Monday afternoon saw the biggest trade of the market’s close take place. The U.S. government, at the time, auctioned off $27 billion worth of 2-year Treasury notes.
The auction was the first leg of their $104 billion worth of new Treasury debts planned for auction throughout much of the open week. Many of those debts are offered in maturities spanning two years to seven years.
The new bond sales are essentially the ‘icing’ on an already sweet year for U.S. government bonds. The relatively stability of these government debts made them very attractive to investors throughout 2014, setting them on pace in their strongest year since 2011.
Demand caused the 10-year note’s price to rise, taking yields down pass the 3 percent benchmark from the start of the year.
Investors also saw good returns through this year—the best since 2011. Treasury bonds returned as much as 4.91 percent this year.
Although some trading is expected to close out the week, most traders expect much of its normally frenetic activity to quell as the holiday break kicks in. Many traders naturally take time away from the market, also causing lower market liquidity that may make bond price changes look more ‘exaggerated’ than they usually look.
Market observers expect new Treasury bond sales to be a big ‘focus’ over the next week for that reason.