U.S. Government Bonds Settle Into Tight Range
May 26 2017 - 03:18PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds retraced early gains Friday, ending the
day little changed amid signs that investors have grown comfortable
with current prices.
The yield on the 10-year Treasury note settled at 2.248%,
compared with 2.254% Thursday. The bond market closed at 2 p.m. and
will remain shut Monday in observance of Memorial Day.
Yields, which rise when bond prices fall, had climbed early in
the week as the market was flooded with new debt supply from both
the Treasury and the private sector. Momentum shifted Wednesday
with the release of minutes from the Federal Reserve's May 2-3
meeting, which suggested the Fed would continue to take a cautious
approach to tightening monetary policy.
Ultimately, though, the 10-year yield was roughly unchanged on
the week, ticking up from 2.243% the previous Friday.
The Bank of America Merrill Lynch MOVE index, which measures
expected Treasury bond price swings based on options, settled at
54.3201 Thursday, its lowest level since August 2014.
"We remain in this very tight range," said Larry Milstein, head
of government and agency trading at R.W. Pressprich & Co. "I
think we've got priced in a Fed hike on June 14 and then it becomes
a question mark."
A round of economic data on Friday had little impact on the
market. Economic growth in the first quarter was revised up to 1.2%
from 0.7%. But a closely watched proxy for business spending on new
equipment was flat in April, disappointing investors who had
expected a small increase in orders.
Next week could bring more significant data for bond investors.
The Fed has strongly signaled that it will raise interest rates at
its June 13-14 meeting. But officials have promised to keep a close
watch on inflation, and their preferred gauge of consumer prices
will be in the spotlight Tuesday.
The Commerce Department's personal-consumption expenditures
price index surpassed the Fed's 2% annual target for the first time
in nearly five years in February. But it fell back to 1.8% in
March, concerning some Fed officials who say the central bank
should be careful about tightening monetary policy as long as
inflation pressures remain muted.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
May 26, 2017 15:03 ET (19:03 GMT)
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