By Min Zeng
Treasury bonds edged higher on Friday as the biggest two-day
selloff in more than a year attracted fresh buyers.
In recent trading, the yield on the benchmark 10-year note was
2.193%, down from 2.204% a day earlier, according to Tradeweb.
When bond yields fall, their prices rise.
The stabilization of the bond market suggests buyers expect bond
yields will stay low amid uncertain global growth outlook.
"I don't think the opinion of the entrenched buyers has changed
much; they still believe rates will stay low for a long, long
time," said Thomas Roth, executive director in the U.S. government
bond trading group at Mitsubishi UFJ Securities (USA) Inc. in New
York.
Treasury bond prices have rallied in 2014, pushing the 10-year
note's yield down from 3% at the start of January, even as the U.S.
economy had strengthened and the Fed ended its monthly bond
purchases.
Demand for U.S. government securities has climbed due to weaker
growth overseas, tumbling oil prices and market stress in some
emerging-market countries.
In addition, the U.S. government bond market has offered more
attractive yields compared with government bonds in Germany, Japan,
the U.K., France and Canada. A rising dollar driven by the prospect
of higher interest rates from the Fed has enabled foreign buyers to
pick up extra returns.
Mr. Roth said among buyers Friday were investors from Asia who
see U.S. bonds offering more value than government bonds in Japan
and Germany.
The yield on the 10-year German government bond was 0.595%
Friday, and the yield on the 10-year Japanese government bond was
0.35%.
Treasury securities overall have posted a total return,
reflecting price appreciation and interest payments, of 4.8% this
year through Thursday, beating 1.5% on U.S. junk bonds, or bonds
sold by lower-rated companies, according to Barclays PLC.
The bond market had taken a beating in the past two sessions as
investors cashed out chips.
The Federal Reserve's stance of being patient in raising
interest rates cheered up global stocks, sparking a big two-day
rally in U.S. stocks. Russia's currency market turmoil also
subsided--the ruble has rebounded after plunging to a record low
versus the dollar on Tuesday.
With U.S. bond yields falling sharply this year, some investors
have cashed out chips to lock in this year's returns, and the
selling had contributed to the recent selloff, traders said.
James Combias, head of U.S. Treasury trading at Mizuho
Securities USA Inc. in New York, expects the 10-year note's yield
to trade between 2% and 2.3% through the end of the year.
Traders expect trading volume in the bond market to decline
during the last two weeks of December--known as the winter holiday
trading period with many investors and traders taking times
off--and the lower liquidity may exaggerate bond price swings.
Write to Min Zeng at min.zeng@wsj.com