U.S. Government Bond Prices Decline After Brief Rally
November 20 2017 - 3:54PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds edged lower Monday as investors were quick
to book profits following an overnight rally.
The yield on the benchmark 10-year Treasury note settled at
2.370%, compared with 2.352% Friday.
Yields, which fall when bond prices rise, declined overnight
after the small, pro-business Free Democratic Party broke off talks
to form a coalition government in Germany.
The rally, however, was short-lived, as investors determined
that "the German economy is strong enough to withstand this little
hiccup," said John Canavan, market analyst at Stone and McCarthy
Research Associates.
This could be a quiet week in the Treasurys market, according to
analysts. The market is closed Thursday for Thanksgiving, and the
most notable economic release is a report on durable goods orders
Wednesday.
One factor that could upset the calm is investors' shifting
appetite for riskier assets.
After holding strong for most of the year, demand for assets
such as stocks and junk-rated corporate bonds has wavered in recent
weeks, offering support for Treasurys, which tend to benefit when
investors adopt safer strategies. Major U.S. stock indexes were on
track for gains on Monday.
Another wild card involves Congress. After the House passed a
sweeping tax overhaul bill last week, the focus is now on the
Senate, where Republicans can afford few defections as they
consider similar legislation.
Treasury yields could rise if the House or Senate bill became
law, in part because each would boost the federal budget deficit,
requiring the government to issue more bonds. A change in tax laws
could potentially spur some economic growth, causing investors to
favor riskier assets. And it could boost inflation, which is a main
threat to government bonds because it chips away at the purchasing
power of their fixed returns.
The Senate is expected to vote on tax legislation after
Thanksgiving.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 20, 2017 15:39 ET (20:39 GMT)
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