US yields recede from decade highs as equities decline

US Treasury yields fell on Friday with shorter-dated yields retreating from the highest levels in a decade, as investors scooped up safe-haven US government debt due to losses in equity prices worldwide on worries about economic growth in China and interest rate hikes in the US.

The yield decline was limited after data showed US producer prices in October accelerated at the quickest rate in six years, supporting the view US inflation would hold near the Federal Reserve’s goal of 2%. Trading volume was light ahead on Monday when the US bond market will be closed for the Veterans Day holiday.

Treasury yields were poised to end the week mixed, with traders attributing large swings to uncertainty about the outcome of the US midterm congressional elections; the $83bn quarterly refunding; and Federal Reserve signals on interest rates. “The market after a week filled with major events feels fatigued,” said Larry Milstein, head of government and agency trading at RW Pressprich & Co in New York.

The benchmark 10-year Treasury yields were down 3 basis points at 3.202%, on track to end the week marginally lower.

The two-year yield was down nearly 3 basis points at 2.941% a day after touching a 10-1/2-year peak of 2.977%. It was poised to rise nearly 3 basis points on the week. The five-year yield scaled down to 3.054%, headed for a weekly increase of more than 1 basis point after hitting a 10-year high of 3.098% on Thursday.

The US central bank, after a two-day policy meeting, signalled the economic expansion remains on track, which would allow for further rate increases.

Interest rates futures implied traders placed about a 76% chance the Fed would raise key lending rates by a quarter point to 2.25-2.50% at its December 18-19 meeting, according to CME Group’s FedWatch programme.