Treasurys Strengthen as Investors Await Fed News
October 23 2017 - 4:31PM
Dow Jones News
By Daniel Kruger
Treasurys prices edged higher Monday as investors paused to wait
for clarity over whom President Donald Trump will nominate to lead
the Federal Reserve.
The yield on the benchmark 10-year U.S. Treasury note fell to
2.375% from 2.381% Friday, posting its second decline in three
days. Bond yields fall when prices rise.
Some analysts said the implications for monetary policy may be
significantly different depending on which candidate Mr. Trump
selects. Potential nominees John Taylor, a Stanford economics
professor, and Kevin Warsh, a former Fed governor, are seen by
investors as likely to favor raising interest rates at a faster
pace than the central bank has suggested it will take.
Others in the running are current Fed Chairwoman Janet Yellen
and central bank governor Jerome Powell, both of whom are seen as
more likely to maintain the status quo as the Fed has projected
three rate increases in 2018. A fifth possibility, White House
economic adviser Gary Cohn, has no record in central banking. Mr.
Trump has said he would like to name his pick before his Nov. 3
trip to Asia.
"People are a little wary of getting out ahead" of a decision
about the Fed's leadership, said Thomas Simons, a money market
economist at Jefferies Group LLC.
Investors are also awaiting the European Central Bank meeting
Thursday, looking for signs about whether policy makers there will
move to slow or curtail the bank's EUR60 billion ($70.5 billion) in
monthly bond purchases. The ECB's three-year policy of negative
interest rates and its massive bond purchases have driven sovereign
bond yields in the 19-nation currency bloc to near record lows, and
encouraged investors to seek relatively higher yields in the
U.S.
Mr. Trump's tax overhaul plan, for which details remain scarce,
also has the potential to affect bond prices. Investors expect that
the possible passage of changes to the tax code would significantly
widen U.S. budget deficits far into the future. The federal deficit
widened in fiscal 2017 to $666 billion, the sixth highest on
record.
Bondholders often express concerns about rising debt levels,
which can jeopardize the ability to make timely payments of
principal and interest.
(END) Dow Jones Newswires
October 23, 2017 16:16 ET (20:16 GMT)
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