U.S. Government Bonds Rise Ahead of Fed Decision
December 13 2017 - 10:15AM
Dow Jones News
By Akane Otani
U.S. government bonds strengthened Wednesday ahead of a policy
announcement from the Federal Reserve.
The yield on the benchmark 10-year U.S. Treasury note was
recently at 2.374%, according to Tradeweb, compared with 2.403%
Tuesday.
Yields, which fall as bond prices rise, slipped early Wednesday
after Labor Department data showed continued signs of weakness in
inflation.
The consumer-price index, which measures what Americans pay for
everything from coffee to prescription drugs, rose 0.4% in
November, in line with what economists surveyed by The Wall Street
Journal had expected.
But core prices, which exclude the more volatile categories of
food and energy, rose just 0.1% in November, missing economists'
estimates for a 0.2% increase. That suggested inflation pressures
remain muted on the whole, some bond analysts said, helping push
Treasury yields lower.
Inflation tends to weaken demand for government bonds, since it
chips away at the purchasing power of their fixed returns.
"The lack of robustness of inflation data very much brings the
continued hawkishness of the Fed into question," Aaron Kohli,
interest-rates strategist at BMO Capital Markets, said in a
note.
The Fed concludes its two-day policy meeting later Wednesday.
Bond investors and traders are widely expecting the central bank to
announce an interest-rate increase, with federal-funds futures
tracked by data provider CME Group showing a 100% chance of at
least one rate hike by year-end.
With a December rate hike all but priced into the markets,
analysts say they will be focusing on any clues the Fed provides on
its expected rate path for 2018 and beyond. A pickup in the pace of
rate rises could pressure stocks and bond yields while sending the
U.S. dollar higher, investors say.
Write to Akane Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
December 13, 2017 10:00 ET (15:00 GMT)
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