U.S. Government Bonds Hold On to Gains After Fed Raises Rates
December 13 2017 - 3:02PM
Dow Jones News
By Akane Otani
U.S. government bonds held on to gains Wednesday after the
Federal Reserve raised short-term interest rates in a decision
widely anticipated among investors and analysts.
The yield on the benchmark 10-year U.S. Treasury note was
recently at 2.370%, according to Tradeweb, compared with 2.378%
before the release of the decision and 2.403% Tuesday.
Yields, which fall as bond prices rise, slipped early Wednesday
after Labor Department data showed continued signs of weakness in
inflation.
The consumer-price index, which measures what Americans pay for
everything from coffee to prescription drugs, rose 0.4% in
November, in line with what economists surveyed by The Wall Street
Journal had expected.
But core prices, which exclude the more volatile categories of
food and energy, rose just 0.1% in November, missing economists'
estimates for a 0.2% increase. That suggested inflation pressures
remain muted on the whole, some bond analysts said, helping push
Treasury yields lower.
Inflation tends to weaken demand for government bonds, since it
chips away at the purchasing power of their fixed returns.
"Any time you have core inflation come in softer than expected,
it invites a little bit of uncertainty as to how aggressively the
Fed can move," said Joe Tanious, investment strategist at Bessemer
Trust.
The Fed concluded its two-day policy meeting Wednesday. Bond
investors and traders had widely expected the central bank to
announce an interest-rate increase, with federal-funds futures
tracked by data provider CME Group showing a 100% chance of at
least one rate hike by year-end before the announcement.
Federal Reserve Chairwoman Janet Yellen is expected to address
the press in a conference later Wednesday. Analysts say they will
be focusing on any clues the Fed provides on its expected rate path
for 2018 and beyond.
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
December 13, 2017 14:47 ET (19:47 GMT)
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