Treasurys Fall; Benchmark Yield Curve Widens To Near-Record Steepness [View All]

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Source: Wall St. Journal


By Min Zeng
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--The flailing Treasury market showed no sign of relief Wednesday as selling continued to mount from a broad range of market participants.

The benchmark 10-year note's yield touched 3.563%, the highest level since May 13. Traders said the yield could hit 3.6% in the short term should the selling gain further traction. Yields move inversely to prices.

Optimism on the U.S. economic outlook has been a main driver in the heavy selloff over the past week, encouraging many investors to move out of safe-haven Treasurys and into riskier assets that offer potential for higher returns should the economic recovery gather pace.

The sharp rise in yields forced many mortgage-backed securities investors to sell in a bid to hedge against further increases in rates that hurt their bond portfolios, traders said. Liquidation before the end of the year added to the rout. Many dealers and investors cashed out to lock in gains before the end of the year, when liquidity is at a premium, traders said.

Read more: http://online.wsj.com/article/BT-CO-20101215-714206.html

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It's going to be an interesting ride, our slow motion over-the-cliff-train-wreck.