Treasury Yield Plumbs 10-Month Low to Close Out a Turbulent 2018

(Bloomberg) -- Bond traders still clinging to their desks in the final session of 2018 drove Treasury yields to multi-month lows across the curve.

The 10-year yield fell as low as 2.68 percent Monday, a level last seen in the teeth of February’s volatility spike. The benchmark rate has been on a sliding trend for most of the fourth quarter, spurred by an equity-market sell-off that at one point left the S&P 500 index almost 20 percent below its record.

A surprisingly weak Federal Reserve Bank of Dallas manufacturing survey and softer oil prices were among the few catalysts to be found Monday, with trading closing early ahead of the New Year holiday.

To read about what Treasuries investors are watching this week, click here.

FTN Financial strategist Jim Vogel said these factors may have highlighted in the longer end of the curve following an aggressive repricing in short-term rates since this month’s Fed meeting.

“It took quite a long time for the rest of the Treasury curve to respond to that, so now there are parts of the real yield curve that are too steep,” he said.

However, he doesn’t expect to see deeper lows in benchmark yields as activity picks up in January.

“In Formula One racing if a driver’s about to crash, they take their hands off the wheel so their arms don’t get broken -- after the Fed, traders took their hands off the wheel,” Vogel said. “But in January, they’re going to have to get serious about what’s my plan in this new market.”

©2019 Bloomberg L.P.