U.S. Treasury prices rose on Thursday after a deal to end the U.S. debt ceiling conflict in Congress and reopen the government encouraged investors to reinvest cash and on expectations that the Federal Reserve will not scale back its stimulus near term.
The government had been expected to exhaust its $16.7 trillion borrowing limit on Thursday, raising fears it would not meet benefit payments and debt obligations in coming days.
"There was money waiting to be put to work until this debt ceiling issue was resolved, so there's some cash moving off the sidelines,'' said Matthew Duch, portfolio manager at Calvert Investments in Bethesda, Maryland.
"Also, the impact of the government shutdown and the possible fogginess of the economic data we'll get for a while has convinced more large firms that the Federal Reserve will not reduce its bond purchases until next year,'' he said. "It becomes harder for the Fed to remove itself from the market.''
Short-covering also helped lift bond prices.
"Some people had thought the 10-year yield might rise to 3 percent, but with the rally pushing the yield down to 2.60 percent, it forced some people out of their short positions,'' Duch said.
Benchmark 10-year notes rose 18/32 in price, their yields easing to 2.598 percent from 2.67 percent on Wednesday when yields had eased in anticipation of a debt ceiling deal. Those yields have dropped from 3.0 percent before the Fed decided last month not to pare its bond purchases.