US Treasury yield bounces back after falling overnight

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The benchmark 10-year US Treasury yield is rising in early morning trading after having dipped overnight, with data released on Friday suggesting investors believe interest rates can go lower.

Asset managers and so-called levered funds, a proxy for hedge funds, increased their net long positioning in the 10-year future, according to data from the Commodity Futures Trading Commission, meaning they bought more than they sold. Both investors groups increased long positioning in the 5-year Treasury future as well.

One explanation for buying Treasuries at these levels is that investors still think prices could rise further, sending yields falling. Expectations of a rise in interest rates at the Federal Reserve’s June meeting fell below 50 per cent on Monday, from over 60 per cent a week ago. Analysts say it is largely a reaction to nervousness over upcoming events this week, culminating in the French election this weekend.

Non-commercial, or speculative, positioning in the 10-year did dip slightly shorter, having seen heavy short covering in previous weeks as the 10-year Treasury yield fell.

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