BOND REPORT: Treasurys See Modest Boost In Safety Bid After Manchester Bombing
May 23 2017 - 9:57AM
Dow Jones News
By Sunny Oh
Treasury prices rose slightly, and yields declined, after a
bombing at a concert in the U.K. drew some money into haven
investments like bonds.
The Treasury yield for the 10-year note edged off 1.1 basis
point to 2.244%, falling as low as 2.225% in early morning trading.
Bond prices move in the opposite direction of yields; one basis
point is equal to one hundredth of a basis point. The 2-year note
lost 1.2 basis point to 1.275%, while the yield for the 30-year
bond, the long bond, fell 0.9 basis point to 2.904%.
Yields slumped as a terrorist bombing at a concert late Monday
in Manchester stirred geopolitical concerns, pushing investors to
U.S. government paper and assets considered as safe during
overnight sessions. Moves were modest, however, with the dollar
slipping 0.1% to 111.17 yen per dollar, while gold was flat in
midmorning trade.
See:Death toll rises to 22 in suspected suicide bombing in
Manchester
(http://www.marketwatch.com/story/death-toll-rises-to-22-in-suspected-suicide-bombing-in-manchester-2017-05-23)
But the bid to safety abated as Treasurys began to trade hands
in European markets buoyed by improving economic data. The Markit
purchasing manager's index for the eurozone held steady at 56.8
(http://www.marketwatch.com/story/eurozone-economic-recovery-continues-in-may-2017-05-23),
which nonetheless represented a six-year high. Any number above 50
is considered growth.
The German Ifo Business Climate Index index, which gauges
sentiment from German executives and business owners, notched a
record high of 114.6 above the expectation of 113.1 in April. The
10-year German benchmark bond, or the bund, gained 0.8 basis point
to 0.405% in May.
"German business executives are pretty pumped, perhaps
encouraged by the way the elections have been going around Europe,"
said Jennifer Lee, senior economist for BMO Capital Markets, in a
note to clients.
Traders will focus on the White House's budget request for 2018
(http://www.marketwatch.com/story/more-than-2-trillion-in-savings-to-come-from-economic-growth-trump-budget-2017-05-22)
on Tuesday. If President Donald Trump can pass his request through
Congress, it could help revive the reflation trade as investors
mark up expectations of his pro-growth policies including tax
reforms and an infrastructure bill.
The reflation trade betted on growth and inflation to head
higher, lifting stocks at the expense of bonds, but prices for both
assets have traveled alongside each other, a reflection of the
market's uncertainty over Trump's pro-growth policies.
With three weeks left to the U.S. central bank's decision to
change interest rates, investors will eye speeches from senior Fed
officials to gauge the level of consensus on the possibility of two
further rate increases this year among its interest-rate setting
committee. Fed. Governor Lael Brainard said it was unclear if the
U.S. economy was at full employment or if labor slack continued to
linger in the jobs market. Inflation was weaker than expected in
March and April, even though U.S. unemployment levels are currently
at 4.4%, a touch below the level considered full employment.
Minneapolis Fed President Neel Kashkari, a voting member this
year of the Fed's rate setting policy panel, was scheduled to speak
this morning, and appear again at a roundtable on building economic
well-being for native communities through homeownership at 3 p.m.
Eastern. Philadelphia Fed President Patrick Harker, also a voting
member, will give a talk on the economic outlook in New York City
at 5 p.m. Eastern.
The Treasury Department will auction off $26 billion of 2-year
Treasury notes at 1 p.m. Eastern. Though government sales of
Treasury notes can impact prices and yields for the overall market,
analysts said demand for the coming auctions should be tepid as the
Fed looks to hike rates in June.
(END) Dow Jones Newswires
May 23, 2017 09:42 ET (13:42 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.