(Bloomberg) -- US Treasuries were rallying Monday, reversing a run of recent losses as the year's second-to-last day got underway in quiet trading.
Key benchmarks were lower by six to nine basis points, led by the five-year tenor. It fell below 4.4%, extending a retreat from last week's peak near 4.5%. The 10-year yield was 8 basis points lower at 4.55% and the benchmark remains some 15 basis points higher since the Fed met earlier this month and cut interest rates for third straight time.
Treasury yields remain near the upper end of their trading range for this year given the limited outlook for further interest rate cuts, along with concerns that rates will remain elevated because of the potentially inflationary policies being proposed by President-elect Donald Trump.
That backdrop leaves the Treasury market close to vanquishing the small gains it has made so far this year. A Bloomberg index of Treasuries has fallen about 1.9% this month through Dec. 27, leaving it up only 0.2% in 2024.
The broad market may see month-end rebalancing before a scheduled early close on Tuesday, as some investors will need to add bonds to keep their portfolios aligned with the duration of the Treasury index.
The bond market has been under pressure since the Fed signaled a less aggressive outlook for monetary easing. Swap contracts show 0.43 percentage points of easing priced for the next year to a just under 4% by next December.
US markets will be closed on Wednesday for New Year's Day.
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