BOND REPORT: Treasury Yields Jump Off 1-month Low After Upbeat Economic Data
March 28 2017 - 05:53PM
Dow Jones News
By Sunny Oh
Improvement in consumer confidence index sinks Treasurys
Treasury prices fell, pushing yields from the lowest level in a
month, Tuesday as better-than-expected economic data raised
inflation expectations, dulling appetite for government bonds.
The yield on the 10-year Treasury note rose 3.8 basis points to
2.411%, ending a two session skid for yields, which hit the lowest
level since Feb. 28
(http://www.marketwatch.com/story/treasury-yields-fall-to-1-month-low-as-trumps-agenda-seen-faltering-2017-03-27)
on Monday. The yield on the two-year note was up 4.5 basis points
to 1.298%, the largest one-day bump since March 1, according to Dow
Jones data.
Meanwhile, the yield on the 30-year bond was , known as the long
bond, was up 3.4 basis points at 3.013%.
Yields move inversely with prices and one basis point is equal
to a hundredth of a percentage point.
Attracting the most attention for Treasury traders on the day
was a March reading of consumer-confidence
(http://www.marketwatch.com/story/consumer-confidence-soars-in-march-to-best-reading-in-16-years-2017-03-28),
which soared to the highest level in more than 16 years, helping to
reinvigorate trades considered risky and tempering recent healthy
demand for the perceived safety of government paper.
"What's happened here is consumers seem to be in a good spot,"
said Tom di Galoma, managing director for Treasury trading at
Seaport Global. "I think the bond market is due to explore higher
yields here, at least for the near term," he said.
The economic report comes as Federal Reserve Vice Chairman
Stanley Fischer, during a CNBC interview Tuesday afternoon forecast
two additional rate increases for 2017
(http://www.marketwatch.com/story/feds-fischer-forecasts-two-more-interest-rate-hikes-this-year-2017-03-28),
and offered a fairly upbeat outlook for the U.S. economy.
"Perhaps most importantly is that job prospects continue to
improve," Jennifer Lee, senior economist for BMO Capital Markets,
wrote in a note.
In other economic data, U.S. house prices roared to their
highest in nearly three years as demand remains hot, with the
S&P/Case-Shiller 20-city index rising 5.7%
(http://www.marketwatch.com/story/home-prices-hit-a-31-month-high-in-january-case-shiller-says-2017-03-28)
in the three-month period ended in January.
Tuesday's Treasury moves follow growing doubts about President
Donald Trump's ability to implement a roster of pro-growth and
inflation-stoking policies following sparked by his failure to
repeal and replace the Affordable Care Act, known as Obamacare.
Against that backdrop, government bond yields had been
declining, as investors bought Treasurys, amid the diminished
threat of inflations corrosive effect on bonds' fixed payments.
On Tuesday, however, the yield decline abated as optimistic
economic reports and revived appetite for risk assets, like stocks,
combined to dull the demand for haven assets like Treasurys and
gold .
Treasury yields had been rising steadily postelection, with the
10-year note hitting a recent peak of 2.6% mid-December, as
investors bet the new Trump administration could quickly push
forward tax reforms and other fiscal policies with a Republican
majority in both the House and the Senate.
Among other Fed speakers, Fed Chairwoman Janet Yellen, Dallas
Fed President Rob Kaplan, and Kansas City Fed President Esther
George all spoke on Tuesday, but their remarks didn't significantly
influence trade, market participants said.
Meanwhile, an auction of $34 billion in five-year Treasury notes
received "average" demand, according to investment bank Jefferies
Group LLC. Treasury auction results can influence yields for the
outstanding market for Treasurys.
(END) Dow Jones Newswires
March 28, 2017 17:38 ET (21:38 GMT)
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