Treasury market closes the quarter in a stalemate

THE Treasury market's bulls and bears are ending the quarter in a virtual stalemate, a sign of scepticism towards the economic outlook that belies the near-record levels in US stocks. Treasuries have gained about 0.7 per cent this year, stabilising after the biggest quarterly loss since the 1980s.

Ten-year yields sank to 2.35 per cent this week, not far from this year's lows. The descent marks a reversal from just two weeks ago, when they briefly exceeded 2.6 per cent and threatened to break above an area flagged by market veteran Bill Gross as potentially signalling the start of a bear market.

But instead of sustained losses, Treasuries have rallied as confidence in the reflation trade waned after Republicans' proposal for healthcare reform failed. The turnaround is reminiscent of December, when the 10-year yield retreated after peaking at 2.64 per cent - still its highest since 2014. The upshot is that as the first quarter winds down, yields are still stuck in a months-old range, with little sense of an imminent breakout to the upside as Wall Street predicts for later this year.