U.S. Government Bonds Little Changed Ahead of Bond Auctions
May 21 2018 - 12:18PM
Dow Jones News
By Daniel Kruger
U.S. government bonds were little changed Monday ahead of the
scheduled sale of $115 billion of short- and intermediate-term
notes.
The yield on the benchmark 10-year Treasury note recently traded
at 3.063%, according to Tradeweb, from 3.067% Friday. Bond yields
rise as prices fall.
Yields steadied and stocks prices gained as investors perceived
risks of a trade war with China had cooled. Treasury Secretary
Steven Mnuchin told Fox News on Sunday that the U.S. was "putting
the trade war on hold" and wouldn't assess tariffs on Beijing while
the two sides talked.
The gap between two- and 10-year Treasury yields, known as the
yield curve, declined Monday to about 0.495% percentage point,
reversing last week's steepening trend. Short-term yields rose the
most, with two-, five- and seven-year auctions occurring in the
short- and intermediate-term parts of the yield curve. Many
investors attribute at least some of the rise in yields this year
to an increase in bond sales needed to fund the government.
The Treasury said in January that it would boost debt sales by
$42 billion in the period from February through April, and in May
it said it would add an additional $27 billion of sales on top of
the earlier increase.
The flatter yield curve means investors "are not getting paid
very much" to take the risk that inflation could accelerate during
the life of the debt, said Michael Cloherty, head of interest-rate
strategy at RBC Capital Markets. Inflation is a threat to the value
of a bonds' fixed-interest payments.
Some investors will also be watching for comments about the path
of interest-rate increases from three Fed officials speaking
Monday. Investors see a 53% likelihood that the Federal Reserve
will raise interest rates four times in 2018, according to CME
Group data. Fed officials penciled in three increases after their
December and March meetings.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
May 21, 2018 12:03 ET (16:03 GMT)
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