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Treasuries rally after U.S. drops huge non-nuclear bomb on IS

Traders work on the floor of the New York Stock Exchange.

Treasuries rallied, reversing earlier declines, after the U.S. dropped the largest non-nuclear bomb in its arsenal on an Islamic State group target in Afghanistan.

The 10-year U.S. yield fell about two basis points to 2.22 percent at 1:10 p.m. in New York, remaining above its session low reached in early U.S. trading. The yield curve from five to 30 years steepened, while the 10-year breakeven inflation rate pared its gain.

Treasuries are poised to rally for the fifth straight week, the longest stretch since July, with yields within the sell-off zone created after U.S. Election Day on Nov. 8. JPMorgan Chase & Co. technical strategists said the 10-year yield has the potential to fall to 1.88 percent on a bullish break of 2.15 percent, though they expect support levels to hold.

U.S. forces in Afghanistan deployed the military's largest non-nuclear bomb, a GBU-43, on an IS target in Afghanistan, according to U.S. Central Command. It comes less than a week after the U.S. launched 59 Tomahawk cruise missiles against the Syrian government, sparking geopolitical tensions that have largely driven Treasuries' gains.