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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