published Mar 27th 2017, 11:16 am, by Elizabeth Stanton

(Bloomberg) —
Treasuries rose Monday, extending last week’s gains, amid rising doubt that the Trump administration will be able to deliver on initiatives including tax cuts after failing to win House approval for health-care reform.

Yields were lower by two to four basis points at 12 p.m. in New York, off session lows that were also the lowest levels since Feb. 28. The 10-year yield was lower by 4 basis points at 2.37 percent, remaining below its 100-day moving average for the first time since September. It declined as much as 6.6 basis points to 2.346 percent. New two-year notes being sold in a $26 billion auction at 1 p.m. traded at 1.245 percent in when-issued trading, still higher than the last two awards.

Yields rebounded after approaching levels that traders and strategists said represented strong resistance, and as this week’s auction cycle drew near; last week’s focus on the fate of the health-care reform bill delayed set-up for the auctions, Mischler Financial trader Glen Capelo said Domestic real-money are better sellers of USTs, while European accounts have been better buyers to capture higher yields, Capelo said USTs also were pressured lower by stabilization in risk assets including oil and stocks, and fading gains for German bonds 2Y auction has support from large speculative short base in TU futures, offset by potential for week’s heavy slate of Fed speakers to alter expectations for path of fed funds rate; MORE Auction cycle continues with $34b 5Y Tuesday, $28b 7Y Wednesday; UST curve may face additional flattening pressure this week from month-end index duration extensions; updated estimate for Bloomberg Barclays Treasury Index unchanged at +0.07 years For UST 10Y, 2.303%-2.317%, low end of range since late November, offers “the most compelling near-term resistance,” BMO strategists said in note Preliminary futures open interest data for Friday, when health-care reform bill was withdrawn amid indications it wouldn’t pass the House, show liquidation of bearish eurodollar options; open interest in EDM7 9850 puts declined by 135k
–With assistance from Edward Bolingbroke.To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang
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