U.S. Government Bond Yields Rise
October 18 2017 - 10:57AM
Dow Jones News
By Akane Otani
U.S. government bonds weakened Wednesday as investors pulled
money out of so-called haven assets.
The yield on the benchmark 10-year U.S. Treasury note was
recently at 2.341%, according to Tradeweb, compared with 2.300% on
Tuesday. Yields rise as bond prices fall.
Bond yields have risen in recent weeks as investors have
increasingly bet that the Federal Reserve will raise interest rates
once more by year's end. Analysts have also been eyeing the
potential that, at the end of her term, Fed Chairwoman Janet Yellen
could be replaced by someone with a more hawkish stance on monetary
policy.
President Donald Trump, who said Tuesday that he has narrowed
his search for the Fed nominee to five candidates, including Ms.
Yellen, is expected to make a decision before leaving for a trip to
Asia on Nov. 3.
A Fed that unwinds easy-money policies faster than investors
anticipate could send yields higher, analysts said. Fund managers
believe a policy misstep from the Fed or the European Central Bank
ranks as the top risk to the markets, Bank of America Merrill Lynch
found in its October global fund manager survey.
Still, others say the Fed's impact on the bond market could be
limited. The Fed has clearly telegraphed its intentions to
normalize its balance sheet and gradually raise rates, several
investors said, and economic growth has been solid enough to
support the moves.
"We've got a body of work from this current Fed composition that
indicates a certain monetary policy path, and while it could
certainly be impacted by new introductions to the voting body,
ultimately they're going to be driven by their dual mandate," said
Bill Northey, chief investment officer for the Private Client Group
of U.S. Bank. "It's not something we're anticipating will take a
material departure from its current path."
Meanwhile, a growing consensus that the Fed will raise rates in
December continued to send yields on shorter-term debt higher. The
yield on the two-year U.S. Treasury note, which tends to be more
sensitive to interest-rate expectations, was recently at 1.567%,
according to Tradeweb, compared with 1.550% on Tuesday -- its
highest level since October 2008.
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
October 18, 2017 10:42 ET (14:42 GMT)
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