U.S. Government-Bond Yields Steady After of Fed Decision
December 11 2019 - 2:59PM
Dow Jones News
By Matt Wirz
U.S. government-bond yields touched session lows after the
Federal Reserve held interest rates steady and signaled the central
bank was unlikely to raise them soon.
The yield on the benchmark 10-year Treasury note, which closed
at 1.833% Tuesday, was around 1.840% in early morning trading. It
then dropped to around 1.807% before falling to 1.802% after the
Fed's announcement, according to Tradeweb. Bond yields fall when
their prices rise.
The decision to keep rates unchanged was expected but "they are
sounding a lot more bullish on the economic outlook," said Mary Ann
Hurley a bond trader at D.A. Davidson & Co about the comments
from the Fed. "I was also surprised to see a rate hike on the
agenda for 2021 -- that's eons away."
Aggressive easing by the Fed and the European Central Bank this
year have set the stage for slow-but-steady economic growth in
developed markets, said S&P Global Ratings economist Paul
Gruenwald in a Wednesday report.
"The outlook for 2020 is therefore shaping up as, hopefully,
unexciting steady-state growth in many advanced economies," he
said.
A slight increase in a key U.S. inflation measure in November
pointed to moderate economic expansion with muted price pressures.
The consumer-price index, which measures the cost of everyday goods
and services, rose 0.3% in November from the previous month.
Inflation hurts the purchasing power of bonds' fixed payments and
can spur central bankers to raise rates.
In emerging markets, Ecuadorean government bonds rebounded after
the country's legislature passed Tuesday tax reforms that President
Lenin Moreno struggled to push through in November. Investors also
took comfort after the International Monetary Fund reached Tuesday
a staff level agreement with Ecuador on the extension of a $498
million lending facility.
Ecuador's 10.75% bond due 2029 climbed to 90.45 cents on the
dollar in morning trading, up from about 88.90 Tuesday and roughly
85 before the passage of the reform bill, according to MarketAxess.
The bond traded around 103 a month ago before President Moreno's
attempt at a fiscal overhaul met strong opposition and foreign
investors dumped the country's debt.
"The initial pushback from the legislation was not a rejection
of the economic program but rather a political mistake from the
Moreno administration to force through an overly aggressive omnibus
reform package," said Siobhan Morden, a strategist at Amherst
Pierpont Securities, in a Wednesday report.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
December 11, 2019 14:44 ET (19:44 GMT)
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