BOND REPORT: Treasury Yields Come Off Highs As Investors Raise Questions Over Tentative Brexit Deal
October 17 2019 - 3:54PM
Dow Jones News
By Sunny Oh
Doubts linger around likelihood of Brexit deal ratification
U.S. Treasury yields came off their intraday highs Thursday
after optimism waned around the U.K.'s tentative agreement to leave
the European Union, amid questions of how it will get approved in a
divided British Parliament on Saturday.
What are Treasurys doing?
The 10-year Treasury note yield was up 0.7 basis points to
1.757%, after trading as high as 1.797%, while the 2-year note rate
was up 1.4 basis points to 1.604%. The 30-year bond yield edged up
0.6 basis point to 2.243%.
What's driving Treasurys?
The earlier selloff in bond markets faded after stocks lost
their momentum after analysts said there remained substantial
obstacles before the Brexit agreement is ratified. It is unclear if
U.K. Prime Minister Boris Johnson's proposal will be approved by
Parliament under the opposition from Northern Ireland's Democratic
Unionist Party.
See: What a Brexit deal would mean for U.S. stocks and global
investors
(http://www.marketwatch.com/story/what-a-brexit-deal-would-mean-for-us-stocks-and-global-investors-2019-10-17)
Johnson had announced the U.K. and European negotiators had
managed to strike a tentative Brexit deal, with European Commission
President Jean-Claude Juncker saying it was a "fair and balanced
agreement." Investors said the breakthrough lowered the chance of
the U.K. leaving the EU without a trade deal in hand.
The U.K. 10-year government bond yield was down 0.9 basis point
to 0.684%, based on Tradeweb data.
The Dow Jones Industrial Average and the S&P 500 index were
slightly higher on Thursday.
Investors handled a raft of U.S. economic data in the morning.
The Philadelphia Fed manufacturing index
(http://www.marketwatch.com/story/philly-fed-manufacturing-index-stumbles-in-october-2019-10-17)
fell to 5.6 in October, after hitting 12 in September. Housing
starts slumped 9.4% in September
(http://www.marketwatch.com/story/housing-starts-fall-9-in-september-but-high-permits-low-mortgage-rates-suggest-construction-slowdown-is-temporary-2019-10-17)
to an annual pace of 1.26 million, while home-builder permits
dropped 2.7% last month to a pace of 1.38 million.
Industrial production fell 0.4% in September
(http://www.marketwatch.com/story/industrial-output-falls-by-most-in-five-months-pushed-lower-by-gm-strike-2019-10-17),
the largest one-month drop since April, and below the 0.2% expected
by economists, according to a MarketWatch survey.
See: Here's what has been agreed between the EU and the U.K. on
Brexit
(http://www.marketwatch.com/story/heres-what-has-been-agreed-between-the-eu-and-the-uk-on-brexit-2019-10-17)
Federal Reserve officials could also give clues to the outlook
for another rate cut before the end of the year. New York Fed
President John Williams is due to speak at 4:20 p.m.
What did market participants' say?
"Buying has grudgingly returned to [Treasurys] as the Brexit
risk breakout faded on the realities of getting the deal passed
through Parliament," wrote Jim Vogel, an interest-rate strategist
at FTN Financial.
(END) Dow Jones Newswires
October 17, 2019 15:39 ET (19:39 GMT)
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