BOND REPORT: Treasury Yields Edge Up Amid Flurry Of Fed Speakers
May 22 2017 - 05:12PM
Dow Jones News
By Sunny Oh
10-year Treasury yield rests below 2.30%
Treasury yields rose as investors weighed remarks by Federal
Reserve policy makers to see if the U.S. central bank would remain
on track to raise interest rates despite tepid first quarter
economic numbers.
The yield on the 10-year Treasury note gained 1.0 basis point to
2.254%. Bond prices move inversely to yields; one basis points
equals one hundredth of a basis point. The yield for the
policy-sensitive 2-year note added 0.1 basis point to 1.279%, and
the yield for the 30-year bond rose 1.2 basis point to 2.915%.
Yields rose as President Donald Trump continued on his first
international trip, at least temporarily taking attention away from
investigations over administration ties to Russia. Analysts say the
administration's pro-growth agenda could be derailed as the Russia
probes continue, lowering inflation expectations, which could be
bullish for bonds. But Fed officials, so far, have given no hints
they're penciling in any impact from U.S. political turmoil.
"None of the speakers [last] week made comments about threats to
the economy stemming from the ongoing drama in Washington," said
Thomas Simons, senior money market economist for Jefferies, in a
note. "For now they view this tension as a temporary sideshow."
The diminished geopolitical concerns fed into the European
sovereign debt market. The yield on the 10-year German government
bond, or bund , rose 2.7 basis points to 0.394%, while the 10-year
French government bond yield climbed 3.5 basis points to
0.844%.
Traders will eye a packed calendar for senior Fed officials as
the probability of a June rate increase heads close to 100%,
according to the Chicago Mercantile Exchange's FedWatch tool
(http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
Members of the Fed have cleared the path to tighten monetary policy
by down-playing the tepid first-quarter data in May's policy
statement
(http://www.marketwatch.com/story/fed-to-signal-rate-hike-plan-in-place-despite-soft-economic-data-2017-04-27).
But recently members of the Fed's interest-rate setting
committee have sent mixed messages to investors, perhaps belying a
lack of consensus that the statement has originally suggested.
The central bank will release its minutes from the May policy
meeting on 2 p.m. Eastern Wednesday, which could clarify the mixed
messages investors have received from different members of the
Fed's interest-rate setting committee.
See: Fed minutes may quell doubt about a June interest-rate hike
(http://www.marketwatch.com/story/fed-minutes-may-quell-fresh-doubts-about-a-june-rate-hike-2017-05-19)
Last week, St. Louis Fed President James Bullard, though a
nonvoting member in 2017, called for a slower pace for monetary
tightening
(http://www.marketwatch.com/story/feds-bullard-questions-need-for-june-rate-hike-2017-05-19).
He labeled the current timetable of two further rate increases as
"aggressive" in light of recent weakness in economic data. In
contrast, Dallas Fed President Robert Kaplan, a voting member,
maintained his call for two more rate increases despite the soft
consumer-price index readings in March and April.
See: Fed's Kaplan backs view for two more rate hikes this year
(http://www.marketwatch.com/story/feds-kaplan-backs-view-for-two-more-rate-hikes-this-year-2017-05-22)
Fed Gov. Lael Brainard will give a speech on opportunity and
inclusion in the U.S. economy at 7:30 p.m. Eastern. Chicago Fed
President Charles Evans, a voting member, will address a private
symposium in Shanghai at 9:10 p.m. Eastern.
(END) Dow Jones Newswires
May 22, 2017 16:57 ET (20:57 GMT)
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