U.S. Government Bonds Strengthen After ECB, Retail Sales

Date : 06/14/2018 @ 4:31PM
Source : Dow Jones News

U.S. Government Bonds Strengthen After ECB, Retail Sales

By Orla McCaffrey 

U.S. Treasury yields fell Thursday after the latest policy decision from the European Central Bank, but the declines were pared after the announcement of a stronger-than-expected batch of U.S. economic data.

The yield on the benchmark 10-year U.S. Treasury note recently traded at 2.948%, according to Tradeweb, compared with 2.931% earlier Thursday and 2.979% Wednesday. Yields fall as bond prices rise.

Bond yields fell early Thursday after the European Central Bank laid out plans to end its bond-buying program by December and signaled it wouldn't raise interest rates "at least through the summer of 2019."

The yield on the 10-year Treasury note then recovered most of the declines after data showed retail sales rose more than expected in May and that the number of Americans filing new claims for unemployment benefits fell more than expected last week.

The latest swings in yields came a day after the Federal Reserve raised its benchmark federal-funds rate by a quarter percentage point and signaled it would likely raise rates twice more in 2018, citing a strong labor market and rising inflation.

In comparison, the ECB's decision not to raise interest rates until mid-2019 struck many analysts as dovish.

"At the beginning of the year, every major economist was certain of two things: the ECB would end QE by September and rate-policy increases would be discussed toward the end of the year," said Jim Vogel, interest-rate strategist at FTN Financial. "You can understand now why people are no longer pushing to get the 10-year above 3%."

ECB President Mario Draghi said the bank's governing council is willing to keep rates unchanged "for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path."

Yields on German and Italian 10-year notes fell after the ECB statement, while the euro fell 1.3% against the U.S. dollar. Currencies often follow changes in bond prices.

Write to Orla McCaffrey at orla.mccaffrey@wsj.com


(END) Dow Jones Newswires

June 14, 2018 11:16 ET (15:16 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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