Treasury Yields Hold Onto Gains After Fed Minutes
October 17 2018 - 4:09PM
Dow Jones News
By Akane Otani
U.S. Treasury yields wobbled but wound up higher Wednesday,
after Federal Reserve minutes showed officials believe that
economic strength justifies continued interest-rate increases.
The yield on the benchmark 10-year U.S. Treasury note settled at
3.178%, compared with 3.158% Tuesday.
Yields, which rise as bond prices fall, slipped overnight and
held on to declines after data showed U.S. housing starts fell more
than expected in September, adding to what has been a streak of
disappointing data for the housing sector.
Weak economic data can spur demand for Treasurys and other
so-called haven assets, sending yields lower.
Yet as U.S. stocks pared their losses around midday, bond yields
bounced off their lows, remaining higher for the day after the Fed
released minutes from its Sept. 25-26 meeting.
Officials had voted unanimously at that meeting to raise
short-term interest rates by a quarter percentage point. The Fed's
minutes showed that, while most officials believe the central bank
will have to raise rates once more in 2018 and around three times
in 2019, they are less in agreement about how far interest rates
will have to rise to reach a so-called neutral level -- the point
at which rates neither drive up nor stall economic growth.
Comments from Fed Chairman Jerome Powell earlier in the month
indicating he believed the economy was still "a long way from
neutral" jolted the bond market a few weeks ago.
"There was a sense before that the Fed was going to be really
cautious about things as they move through the cycle...then we had
the strong employment data and I think it was like, 'Oh, maybe
not,'" said Kathy Jones, chief fixed income strategist at the
Schwab Center for Financial Research.
That being said, bond-market volatility appears to have wound
down since the start of the month. Barring a surprise jump in
inflation, "we anticipate [yields] will be relatively contained,"
Ms. Jones said.
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
October 17, 2018 15:54 ET (19:54 GMT)
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