Bonds Edge Higher in Quiet Pre-Holiday Trade

U.S. Treasuries traded near the week’s lowest yield/highest price levels Friday with the long end leading while the two-year lagged in holiday-thinned trade ahead of an early close and long weekend. Participants anticipate little in the way of activity although ongoing geopolitical concerns are expected to keep a floor under prices. Data showed consumer sentiment in December was at the year’s highs while new home sales grew more than expected in November.

The 30-year recently traded 3.111% from an overnight low near 3.133% and 3.129% close Thursday. The 10-year is near 2.533% after a drop to 2.5587% overnight and a 2.55% close. The five-year is near 2.025% from 2.048% overnight and 2.035% Wednesday. The two-year has maintained minor losses near 1.205% from a close near 1.195%.

The curve trade has seen position unwinding along a flatter slope with the yield gap between the two- and 10-years tightened to 1.33 from 1.36 Thursday, which was at the steepest levels since November 2015. The spread between the five- and 30-year yields narrowed to 1.08 plus from 1.09 plus.