U.S. Government Bonds in Holding Pattern as Investors Await Inflation News
June 23 2017 - 4:28PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds remained stuck in a holding pattern
Friday, with yields slipping slightly on a daily and weekly basis
as investors awaited more data to either confirm or challenge their
lowered inflation expectations.
The yield on the 10-year Treasury note settled at 2.146%,
compared with 2.153% Thursday and 2.157% the previous Friday.
Yields, which fall when bond prices rise, have been remarkably
steady in recent days. The 10-year yield hovered just above its
closing low of the year for four consecutive sessions.
Yields are being held down to a large degree by a run of soft
inflation data, which has boosted the appeal of government debt and
raised doubts about the Federal Reserve's plans to raise interest
rates at least one more time this year. Their decline has been kept
in check, at the same time, by key Fed officials insisting
inflation is still on track to reach their 2% target.
Inflation is a main threat to government bonds because it chips
away the purchasing power of their fixed returns and can lead to
tighter monetary policy.
The next major reading on inflation won't come until the end of
next week, when the Commerce Department releases its latest report
on the personal-consumption expenditures price index, the Fed's
preferred inflation gauge. A week after that, investors will be
closely watching data on wage inflation contained in the June
nonfarm jobs report.
"Anything inflation related will probably have a little more
weight in the next few months, because that's the key indicator
that's been missing," said Aaron Kohli, interest-rate strategist at
BMO Capital Markets.
Complicating the inflation outlook has been the recent
volatility in oil prices, which entered into a bear market this
week for the first time since last summer. Lower energy prices
depress headline inflation.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
June 23, 2017 16:13 ET (20:13 GMT)
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