U.S. Government Bonds Strengthen Ahead of Fed Minutes
February 21 2018 - 11:53AM
Dow Jones News
By Akane Otani
U.S. government bond prices edged higher Wednesday ahead of the
release of minutes from the Federal Reserve's January policy
meeting.
The yield on the benchmark 10-year U.S. Treasury note was
recently at 2.888%, according to Tradeweb, compared with 2.895%
Tuesday.
Bond yields, which rise as prices fall, have climbed to
multiyear highs this month, lifted by signs that long-dormant
inflation could be picking up and by concerns that larger budget
deficits could increase the supply of government bonds in the
market at a time when the Fed is tapering its bond purchases.
The selling sent the yield on the 10-year Treasury note, which
affects everything from mortgage rates to credit cards, past 2.91%
on Feb. 14 -- its highest level since January 2014. Inflation is a
threat to the bond market since it chips away at the purchasing
power of bonds' fixed interest payments.
Yet as global stocks have stabilized, recouping their losses
from their rout earlier in the month, selling in the bond market
has generally eased.
Skepticism over how quickly inflation is picking up -- and
questions over whether data showing a pickup in wages and consumer
prices was an anomaly, rather than a broad trend -- could help cap
a further rise in yields, investors say.
"It felt like it was overdone," Greg Peters, managing director
and senior investment officer at PGIM Fixed Income, said of the
recent selling in Treasurys. "Inflation is stabilizing here, but
it's not at a tremendous takeoff point like some people are
predicting."
Later Wednesday, investors will be parsing minutes from the
Fed's latest policy meeting.
The minutes could show whether officials are rethinking their
plan to raise short-term interest rates three times this year,
especially if it appears that inflation could break through the
central bank's 2% target.
So far, federal-funds futures, used by traders to place bets on
the course of interest rates, point to a 28% chance the Fed raises
rates at least four times this year -- up from 24% one week ago,
according to CME Group.
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
February 21, 2018 11:38 ET (16:38 GMT)
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