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USTs SET TO GAIN FURTHER AT MONTH END

ADMIN || 26th November 2025

Yields on 10-year notes briefly broke strong resistance at 4% today for the first time since the October FOMC meeting. That lends to a further rally in Treasuries at the same time steepeners are back in vogue.

Yields rallied across the curve with the benchmark 10-year falling as low as 3.9865% during the New York session, the lowest since Fed Chair Jerome Powell delivered a hawkish cut last month. The penetration of a psychological level means technicals are working in tandem with weaker economic fundamentals to support Treasuries.

We’re now approaching month-end, punctuated by a holiday Thursday and an early close Friday, shortening the trading week. Duration extensions that come around the end of the month and tend to spur buying at the long end have seen limited flows thus far despite the recent rally. Market estimates month-end extensions of 0.11 year for Dec. 1. This exceeds the 12-month average of 0.08 year, meaning there might be more than usual demand as the last two trading days of the month lie ahead. Real money is in Treasury futures, a sign investors are looking for higher prices ahead, according to multiple dealers that see the flow.

The Federal Deposit Insurance Corp. Tuesday voted to relax key bank-capital rules, a change that can allow banks to hold more Treasuries. That can also underpin bonds once the holiday passes.

Two-thirds of the week’s 2s, 5s and 7-year Treasury auctions are in the rear view, meaning some of the mini flattening into the front-end loaded supply can ebb. Wednesday brings September preliminary durable goods data, which is expected to weaken, and the perpetually weak Chicago PMI. The Fed’s Beige Book is also expected to push back against the hawks and that could all lend to more bull steepening or shorter-term rates falling faster than longer-term ones ahead.

We’ve seen 2s10s and 5s30s steepen in 12 of 16 days so far this month, after investors seized on an opportunity at midmonth to add to the popular bond trade. They did so again in recent days including Tuesday after Kevin Hassett became the frontrunner to lead the Fed.

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