BOND REPORT: Treasurys Claw Back Losses As Talk Of Taylor As Next Fed Boss Eases
October 17 2017 - 3:55PM
Dow Jones News
By Sunny Oh
President Donald Trump is set to meet Federal Reserve Chairwoman
Janet Yellen on Thursday
Treasurys retraced their losses on Tuesday after abating
concerns that a potential replacement for Federal Reserve
Chairwoman Janet Yellen next year would be more aggressive in
raising interest rates.
What are Treasurys doing?
The benchmark 10-year Treasury yield fell a basis point to
2.300% after hitting an intraday high of 2.338%. The 2-year yield
edged higher to 1.550% from 1.542%, setting a fresh 10-year high.
While, the 30-year yield fell 2 basis points to 2.803%. Bond prices
move in the opposite direction as yields.
What's driving markets?
Talk of Stanford economist John Taylor's candidacy as next chair
of the Federal Reserve, if Yellen isn't reappointed, unsettled
investors. The creator of the Taylor rule, which suggests interest
rates should be three times as high as they are now. If appointed,
its surmised by analysts that Taylor could lead to much tighter
monetary policy. That said, Taylor would likely moderate his views
once at the helm of the central bank, strategists speculate.
However, it isn't clear that Taylor is the front-runner, with
Trump slated to meet Yellen on Thursday.
See: John Taylor met Trump about Fed chair post
(http://www.marketwatch.com/story/john-taylor-met-trump-about-fed-chair-post-2017-10-12)
What do market participants say?
"We're hearing some dip-buyers coming in. But there is also some
chatter that its more of an open field on who will be the next Fed
head. We saw some weakness of the back of the rumors of that Taylor
would be chosen. I now see some pushback against that narrative as
there's no real consensus yet," said Larry Milstein, managing
director of government and agency trading at R.W. Pressprich &
Co.
What else is on investors' radar?
What are other assets doing?
The yield for the 10-year U.K. government bond, or gilt, slid 6
basis points to 1.28%, while the pound also fell to $1.3179 from
$1.3250
(http://www.marketwatch.com/story/dollar-aims-for-4th-day-of-gains-pound-flops-despite-climb-in-uk-inflation-2017-10-17)
on late Monday.
Bank of England Gov. Mark Carney said inflation hadn't t hit its
ceiling even after it hit 3%, the fastest pace in more than five
years. His refusal to indicate whether the central bank should
raise rates in November and dovish remarks by and new deputy Gov.
Dave Ramsden have cast doubt that the BOE will tighten monetary
policy next month.
(END) Dow Jones Newswires
October 17, 2017 15:40 ET (19:40 GMT)
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