U.S. Government Bonds Gain as Catalonia Concerns Return
October 19 2017 - 05:15PM
Dow Jones News
By Daniel Kruger
U.S. government bonds gained Thursday as investors sought assets
perceived as relatively safe after tensions heightened between the
Spanish government and the Catalan independence movement.
The yield on the benchmark 10-year Treasury note fell to 2.323%
from 2.339% Wednesday. The yield has fallen in four of the past six
sessions. Yields fall as bond prices rise.
After Catalonia's leaders on Thursday defied an ultimatum from
Madrid by failing to abandon their push for independence, Spanish
Prime Minister Mariano Rajoy called an extraordinary cabinet
meeting for Saturday, where the government is expected to invoke a
never-before-used article of Spain's constitution to reduce some of
the region's autonomy.
Investors also bought Treasurys as they focused on the potential
for inflation to remain sluggish no matter whom President Donald
Trump designates as his choice to lead the Federal Reserve.
Potential picks include Fed governor Jerome Powell, White House
economic adviser Gary Cohn, Stanford economics professor John
Taylor and former Fed governor Kevin Warsh. Mr. Taylor and Mr.
Warsh are seen by analysts as significantly more hawkish than
Chairwoman Janet Yellen, who is also being considered.
Ms. Yellen herself has been more aggressive in trying to restore
monetary policy to precrisis norms than many investors had
expected. At their meeting last month, policy makers forecast that
they could raise interest rates in December and three more times in
2018, even though the measure of inflation tracked by the Fed was
1.4% in August, below its 2% target.
Ms. Yellen has attributed the sluggish pace of consumer prices
to transitory factors, and said she expects inflation to return to
the central bank's target. Inflation erodes the purchasing power of
a bond's fixed interest payments over time.
"There's a fair amount of hawkish sentiment coming out of the
Fed," said Brian Edmonds, head of interest rates at Cantor
Fitzgerald LP. "Unless we do get some real inflation, you'd expect"
longer-term yields to fall relative to short-term yields.
(END) Dow Jones Newswires
October 19, 2017 17:00 ET (21:00 GMT)
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