BOND REPORT: 10-year Government Yield Hits Nearly 4-month Low Near 2.80% As Treasurys Rally
December 18 2018 - 3:59PM
Dow Jones News
By Sunny Oh
Federal Reserve is expected to raise rates on Wednesday
Treasury prices rose Tuesday, pushing yields lower, after stocks
struggled to bounce back from their multisession rout amid an oil
slump and a Federal Reserve meeting, where a rate hike is
expected.
The 10-year Treasury note yield was down 3.2 basis points to
2.825%, its lowest since Aug. 23. The benchmark rate approached
near 2.80%, the lowest of its trading range of the past seven
months.
The 2-year note yield slipped 5.2 basis points to 2.650%, while
the 30-year bond yield fell 3.7 basis points to 3.077%. Both
maturities hit their lowest levels since Sep. 6. Bond prices move
in the opposite direction of yields
Stirring up demand for haven assets, equities struggled to hold
on to early gains as oil markets came under pressure. Analysts say
a production glut may have driven the weakness in crude prices, but
many cite its bearish implications for global growth as the reason
for the muted investor sentiment. A U.S. crude benchmark fell more
than 7% to $46.24 a barrel.
The S&P 500 and the Nasdaq Composite attempted to eke out
gains, after falling to their lowest close since the fall of 2017
on Monday.
Market participants will be closely awaiting the Fed's policy
decision on Wednesday. Against a backdrop of solid economic data,
the central bank is still expected to raise rates for the fourth
time this year, even as the slump in equities has Wall Street
clamoring for a pause to the Fed's tightening cycle as soon as this
week's meeting.
With a rate increase for December mostly baked in, traders will
shift their focus to the Federal Open Market Committee's so-called
dot plot, the economic and interest rate forecasts by the
rate-setting body's members, which last pointed to three rate
increases in 2019.
Analysts say the central bank may cut next year's rate hike
projections. Futures for the fed-funds market, where traders can
bet on the direction of monetary policy, only show one rate hike by
the end of next year.
"What's embedded in market expectations is a dovish hike," Greg
Staples, co-head of fixed income North America at DWS, told
MarketWatch.
Read: Wall Street says Fed's 'quantitative tightening' program
could end much sooner than Powell has flagged
(http://www.marketwatch.com/story/wall-street-says-feds-quantitative-tightening-program-could-end-much-sooner-than-powell-has-flagged-2018-12-17)
On the data front, housing starts for November ran at a
seasonally adjusted annual 1.256 million rate in November, 3.2%
higher than in October. Economists polled by MarketWatch had
expected it to come in at an annual pace of 1.23 million. The
stronger-than-expected data could suggest weakness in the housing
market may be overstated.
(END) Dow Jones Newswires
December 18, 2018 15:44 ET (20:44 GMT)
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