Treasuries Have Best Day Since March on Refunding, Fed Path

(Bloomberg) -- Treasuries enjoyed their best day in more than seven months on signs the Federal Reserve is close to done raising rates, and the US government may not sell as much debt as previously expected. 

The benchmark 10-year note rallied, with yields falling almost 20 basis points on the day, the most since March, data compiled by Bloomberg show. Rates on 5- and 7-year Treasuries slumped more than 20 basis points from a day earlier.

The gains mark a sharp about-face for the bond market after 10-year yields surpassed 5% for the first time since 2007 last week. Those moves prompted raised concerns about the passthrough to the global economy and whether tighter financial conditions could ultimately create a recession. 

On Wednesday, Fed Chair Jerome Powell acknowledged those concerns and commented that the interest-rate cycle has already come “very far.” Traders took that as a sign further hikes are less likely, and increased their expectations for cuts next year, Fed swaps show. 

Read more: US Slows Its Ramp-Up of Longer-Term Debt Sales, Spurring Rally

The US Treasury's refunding announcement earlier in the day showed the government borrowing slightly less than expected over the next three months. That reassured some investors about the impact of supply on yields, fueling a relief rally.

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