BOND REPORT: 2-year Treasury Yield Rises Ahead Of Key Fed Meeting
December 11 2017 - 5:41PM
Dow Jones News
By Sunny Oh
Fed officials meet Dec. 12-13 and are widely expected to raise
rates
Short-dated yields rose on Monday ahead of a midweek Federal
Reserve meeting that is likely to result in the central bank's
third, and final, interest-rate increase of 2017, while Janet
Yellen's last news conference as Fed chairwoman will deliver
further insights about the central bank's outlook for the U.S.
economy.
What are Treasurys doing?
The 2-year note yieldthe maturity most sensitive to expectations
for Fed policy, rose 2.5 basis points to 1.823%. The benchmark
10-year Treasury note yield was mostly flat at 2.387%, while the
yield for the 30-year bond was little changed at 2.772%.
Bond prices move in the opposite direction of yields.
What's driving markets?
Investors are mostly looking ahead to a week with first-tier
economic data and a Federal Reserve meeting Dec. 12-13, at which
the central bank is expected to raise rates. Consumer-price index
data, retail sales and industrial-production numbers are set to
arrive in the next few days.
The meeting's news conference helmed by Fed Chairwoman Janet
Yellen could serve as her swan song before she retires in February.
Investors said potential tax cuts could influence the central
bank's growth outlook. Still, there was unlikely to be many changes
to future rate projections and economic forecasts.
See: Here's why the Fed will hike interest rates
(http://www.marketwatch.com/story/heres-why-the-fed-will-hike-interest-rates-2017-12-11)
Market participants reduced risk earlier in the day, supporting
a rise in haven bond prices, after a report of a terrorism attack
in New York, where a suspect was arrested after detonating a
homemade bomb
(http://www.marketwatch.com/story/possible-explosion-at-new-york-citys-port-authority-bus-terminal-2017-12-11).
What did market participants say?
"The Fed is going to deliver another quarter-point of tightening
on Wednesday and while that aspect of the FOMC meeting is a
foregone conclusion, the open question remains how will the
committee characterize the broader economic and inflation outlook,"
wrote Ian Lyngen and Aaron Kohli, fixed-income strategists at BMO
Capital Markets.
What else is on investors' radar?
The European Central Bank will announce its rate decision and
economic forecasts on Thursday. The ECB has committed to extending
its bond-buying until Sep. 2018, and said it would only raise
interest rates once it tapered its asset purchases.
The Treasury Department unloaded $20 billion of 10-year notes to
tepid demand. Analysts said yields for long-dated maturities
trading at depressed levels, and therefore lofty prices, has
tempered bidder enthusiasm. Trading in outstanding government paper
can be influenced by new issuance.
On the data front, the Job Openings and Labor Turnover Survey
showed job vacancies in October fell to 5.99 million from 6.18
million.
How are other assets doing?
The German 10-year government bond yield fell 1.4 basis point to
0.293% after European stock indexes were in negative territory. On
Monday, Germany's DAX 30 index(DAX) closed down 0.2% at 13,123.06,
and France's CAC 40 finished down 0.2% to 5,386.83, while Spain's
IBEX 35 fell 0.1% to close at 10,306.90.
(END) Dow Jones Newswires
December 11, 2017 17:26 ET (22:26 GMT)
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