Hopes for Brexit Resolution Lift Government-Bond Yields
October 21 2019 - 5:40PM
Dow Jones News
By Sam Goldfarb
U.S. government-bond prices fell Monday, further increasing the
gap between longer-term and shorter-term Treasury yields,
reflecting investors' optimism that U.K. lawmakers are poised to
resolve the uncertainty surrounding Brexit.
The yield on the benchmark 10-year U.S. Treasury note settled at
1.794%, compared with 1.747% Friday.
Yields, which rise when bond prices fall, climbed as analysts
said U.K. Prime Minister Boris Johnson may have the votes to win
approval of his Brexit deal this week.
Mr. Johnson suffered a setback over the weekend when lawmakers
forced him to ask the European Union for another delay to Britain's
withdrawal from the bloc. However, further votes are expected soon
that could make an extension beyond the Oct. 31 deadline
unnecessary.
In keeping with the recent trend, yields increased on
longer-term Treasurys on Monday more than they did on short-term
notes.
The gap between the yield on the 10-year note and the two-year
note, for example, reached as much as 0.195 percentage point in the
session -- a significant reversal from late August, when the
two-year yield briefly exceeded the 10-year yield in what is known
as an inverted yield curve.
Investors closely monitor the dispersions of Treasury yields
because the so-called yield curve has often inverted ahead of
recessions.
Investors and analysts say the yield curve has steepened
recently in part because of easing trade tensions between the U.S.
and China and signs of progress in resolving Brexit, along with
continued expectations that the Federal Reserve will keep cutting
interest rates.
While long-term yields are largely determined by expectations
for economic growth and inflation, short-term yields have been
anchored by expectations for rate cuts because they are
particularly sensitive to changes in monetary policy.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
October 21, 2019 17:25 ET (21:25 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.