Bonds Give Up Monday Gains in Quiet Trade

U.S. Treasuries were pressured early Tuesday in holiday-thinned inactivity with the shorter end outperforming as equities aimed higher. Prices reversed Monday’s safe-haven bid, with stocks sapping support as recent geopolitical and terrorists incidents losing their sting. The Bank of Japan left policy unchanged, as expected, while the dollar heads toward 14-year highs.

The market is holding just off the lows with the 30-year recently traded 3.162% after an overnight high yield/low price at 3.166% and 3.12% close Monday. The 10-year is near 2.588% from an overnight drop to 2.589% and a close near 2.54%. The five-year is 2.069% after sliding to 2.078% overnight versus 2.025% Monday. The two-year is near 1.249% from a 1.265% low against a close near 1.228%.

The curve trade is mixed with the yield spread between the two- and 10-years widened to 1.33 plus from 1.31 plus Monday, maintaining the steepest gap since mid-November 2015. The yield differential between the five- and 30-years is little changed near 1.09.