A newly elected Democratic president pushes a controversial tax increase through Congress without a single Republican vote. A veteran Federal Reserve chairman holds short-term interest rates at record lows. And the economy struggles to recover from a financial crisis.
Treasury 10-year note yields will increase as much as 72 basis points from the lowest level since April 2009 by year-end as the U.S. economy avoids a double-dip recession, according to Bank of America Corp.
The biggest Treasury rally in five months is underlining market concern that President Barack Obama and House Republicans will fail to avert $607 billion in mandated spending cuts and tax increases starting Jan. 1.
U.S. stocks rose on better-than- forecast earnings from companies including Pfizer Inc. and Valero Energy Corp., returning benchmark indexes to five-year highs. Oil helped lead a rally in commodities as global reports boosted economic confidence, while the dollar fell.
Treasuries fell, pushing 10-year note yields higher for the first in five weeks, on optimism President Barack Obama and lawmakers will reach an agreement to avert the so-called fiscal cliff, damping refuge demand.