BOND REPORT: Treasury Yields End Higher As Lawmakers Move To End Government Shutdown
January 22 2018 - 4:21PM
Dow Jones News
By Sunny Oh
The selloff in U.S. Treasurys resumed on Monday, pushing yields
higher, after Senate leaders reached a deal to end the government
shutdown.
What are Treasurys doing?
The yield for the 10-year benchmark Treasury note was up 2.4
basis points to 2.663%, according to WSJ Market Data Group.
The 2-year note yield was up 1.5 basis point to 2.073%, marking
the 14th straight day of yield gains. The 30-year bond rate was up
1.4 basis point to 2.927%, the highest in close to three
months.
Bond prices move in the opposite direction of yields.
What's driving Treasurys?
An agreement on Monday saw a resolution to the government
shutdown. That put the factors that had led to last week's selloff
back into the focus of investors. Concerns over higher inflation
expectations, increased Treasurys issuance and a pullback of
foreign investors are likely to weigh on bonds, said analysts.
See: Bond market braces for $ 1 trillion tsunami of Treasurys
this year
(http://www.marketwatch.com/story/bond-market-braces-for-1-trillion-tsunami-of-treasurys-this-year-2018-01-16)
The Bank of Japan is holding its two-day policy meeting this
week, while the European Central Bank is set to begin their
get-together on Thursday. In the backdrop of strengthening economic
conditions, investors have raised the outlook for the central banks
to tweak their policy guidance in preparation for a shift away from
years of ultraloose monetary policy. Low interest rates elsewhere
have kept U.S. bond yields depressed as foreign investors have
plowed cash into the U.S. to snap up positive-yielding assets.
Read: BOJ and ECB expectations have trader hopes riding high for
the yen and the euro
(http://www.marketwatch.com/story/boj-and-ecb-expectations-have-trader-hopes-riding-high-for-the-yen-and-the-euro-2018-01-19)
What did market participants say?
"Overall, the markets have viewed the shutdown as a nonevent,"
said Charlie Ripley, senior investment strategist for Allianz
Investment Management. "The inflation picture is starting to pick
up again, we've had six months of flatline inflation, which appears
to have taken a turn in December. Some of that's being priced into
the bond market."
What's on investors' radar?
The Senate will hold a confirmation hearing for Marvin
Goodfriend as governor of the Federal Reserve Board. He is a known
critic of the central bank's bond-buying, but has shown an appetite
for unconventional monetary policy such as the use of negative
interest rates
(https://www.kansascityfed.org//media/files/publicat/sympos/2016/econsymposium-goodfriend-paper.pdf?la=en).
A reading on the Chicago Federal Reserve's national activity
index rose to 0.27 in December from 0.11 in November.
What other assets are on the move?
European and Japanese bonds showed muted trading ahead of the
ECB and BOJ policy meetings. The yield for the German 10-year
government bond, a proxy for the eurozone, was down 0.6 basis point
at 0.502%. The Japanese 10-year government bond yield was little
changed at 0.079%.
(END) Dow Jones Newswires
January 22, 2018 16:06 ET (21:06 GMT)
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