By Min Zeng 

The yield on the benchmark 10-year U.S. Treasury note fell to a one-month low Monday amid a broad retreat after House Republicans pulled their health-care bill before a vote in Congress last week.

The yield fell to as low as 2.348%, the lowest since the end of February, according to Tradeweb. It was recently at 2.376%, compared with 2.396% Friday. Yields fall as bond prices rise.

The GOP's failure to pass their health bill represents a big setback for President Donald Trump's legislative agenda, raising investors' concerns over his ability to push through his proposals of fiscal stimulus, including lower taxes, large infrastructure spending and less burdensome regulations.

"The development doesn't bode well for the prospects of Trump's other big initiatives," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "The pendulum of political momentum has swung in favor of gridlock at this moment."

Since Mr. Trump's win in November, buying stocks and the dollar while selling Treasurys -- so-called Trump trades -- have been popular moves among investors as they bet that fiscal stimulus via tax cuts and large infrastructure spending would boost growth and inflation.

These bets pulled back across the board Monday. The Dow Jones Industrial Average fell to the lowest in more than a month and was on track for its longest losing streak since 2011. The ICE dollar index, which measures the U.S. currency against a basket of other currencies, fell to the lowest level since November.

These concerns stoked demand for assets considered havens. Government bond yields in Germany and the U.K. also fell while gold prices gained ground.

Monday's price gains extended the Treasury bond market's rebound from a selloff earlier this month. The 10-year yield closed above 2.6% on March 13 and settled at the highest level since September 2014, as investors' expectations brought forward the Federal Reserve's rate increase from June to March.

The yield sank after the Fed raised rates but signaled a slow path of tightening, boosting the appeal of bonds. The pullback of the Trump trades over the past week deepened the bond market's strength.

Wagers on higher bond yields, or shorts, have been retreating. Unwinding shorts require investors and traders to return to the bond market as a buyer, driving yields lower. When short-covering trades intensify, that would send yields down sharply, analysts say.

Hedge funds and money managers accumulated a net $74 billion worth of shorts for the week that ended March 21, via Treasury futures, according to TD Securities. That was down from $89 billion during a previous week. The net shorts reached $100.7 billion in early January, the highest since 2008.

Some say bond yields' declines may not last long. They argue that the failure to repeal the Affordable Care Act may strengthen Mr. Trump's resolve to push through fiscal stimulus, and that eventually a fiscal package is likely to roll out.

The 10-year yield has jumped about 1 percentage point from its record close low of 1.366% set last July, driven by an improving global economic outlook, higher inflation, the prospect of expansive U.S. fiscal policies and the Fed's plan to raise short-term interest rates.

Write to Min Zeng at min.zeng@wsj.com

(END) Dow Jones Newswires

March 27, 2017 11:39 ET (15:39 GMT)

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