BOND REPORT: Treasury Yields Rise As Investors Await Fed Meeting
September 24 2018 - 11:32AM
Dow Jones News
By William Watts, MarketWatch
Oil prices jump as OPEC, allies fail to boost output
Treasury prices weakened Monday, pushing up yields, as investors
awaited a Federal Reserve meeting that's expected to produce a
midweek rate increase and as oil prices jumped to a four-year
high.
The yield on the 10-year Treasury note rose 0.8 basis point to
3.075%, while the 2-year note yield edged down 0.4 basis point to
2.809%. The yield on the 30-year Treasury bond rose 0.1 basis point
to 3.208%. Yields and debt prices move in opposite directions.
The Fed's rate-setting Federal Open Market Committee is seen as
virtually certain to deliver a quarter-point rate increase when it
concludes a two-day meeting Wednesday.
See:With its last easy decision, Fed will try to avoid adding
fuel to the fire
(http://www.marketwatch.com/story/with-its-last-easy-decision-fed-will-try-to-avoid-adding-fuel-to-the-fire-2018-09-21)
But analysts said the Treasury market's reaction is less clear
and might turn on what Fed Chairman Jerome Powell has to say in his
postmeeting news conference and what the central bank says about
the future rate path. Rising yields, meanwhile, have attracted
attention but haven't derailed a stock-market rally that took the
Dow Jones Industrial Average back to record territory last week for
the first time since January while also pushing the S&P 500
index to an all-time high.
"The FOMC is a fait accompli (with 90%+ pricing of a hike this
Wednesday), but the bond market reaction isn't," said Kit Juckes,
global macro strategist at Société Générale, in a note. "The
near-term risk is higher yields and market stress, even if
longer-term Treasurys have value."
Stocks got off to a soft start
(http://www.marketwatch.com/story/dow-futures-imply-slight-retreat-from-record-as-new-tariffs-take-effect-2018-09-24)
after Friday's record finish for the Dow. The weakness comes as
U.S. tariffs on additional Chinese goods and retaliatory tariffs by
Beijing on U.S. imports take effect and after China canceled trade
talks with the U.S. that were planned for the coming days.
See:China accuses U.S. of 'trade bullyism' as $200 billion in
tariffs kick in
(http://www.marketwatch.com/story/china-accuses-us-of-trade-bullyism-as-200-billion-in-tariffs-kick-in-2018-09-24)
Meanwhile, oil prices jumped
(http://www.marketwatch.com/story/oil-prices-vault-higher-as-major-producers-rebuff-trumps-demand-to-keep-crude-in-check-2018-09-24),
pushing November futures Brent crude, the global benchmark, back
above $80 a barrel while November West Texas Intermediate crude ,
the U.S. benchmark rose more than 2% to $72.29 a barrel. Members of
the Organization of the Petroleum Exporting Countries and nonmember
crude producers over the weekend in Algiers delivered no formal
plan to boost output to offset an estimated 2 million barrels a day
of oil that will be lost due to U.S. sanctions on Iran's exports
set to take effect Nov. 4.
Higher oil prices can fuel concerns about headline inflation
pressures.
Rising inflation is bearish for bonds because higher prices can
chip away at a bond's purchasing power.
(END) Dow Jones Newswires
September 24, 2018 11:17 ET (15:17 GMT)
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