Hopes for Brexit Resolution Lift Government-Bond Yields

Date : 10/21/2019 @ 4:15PM
Source : Dow Jones News

Hopes for Brexit Resolution Lift Government-Bond Yields

By Sam Goldfarb 

U.S. government-bond prices fell Monday, further increasing the gap between longer-term and shorter-term Treasury yields, as investors expressed optimism that U.K. lawmakers are poised to resolve the uncertainty surrounding Brexit.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.787%, according to Tradeweb, compared with 1.747% Friday.

Yields, which rise when bond prices fall, climbed as analysts said U.K. Prime Minister Boris Johnson may have the votes to win approval of his Brexit deal this week.

Mr. Johnson suffered a setback over the weekend when lawmakers forced him to ask the European Union for another delay to Britain's withdrawal from the bloc. However, another vote is expected soon that could make an extension beyond the Oct. 31 deadline unnecessary.

In keeping with the recent trend, yields increased on longer-term Treasurys on Monday more than they did on short-term notes.

The gap between the yield on the 10-year note and the two-year note, for example, reached as much as 0.195 percentage point on Monday -- a significant reversal from late August, when the two-year yield briefly exceeded the 10-year yield. Investors closely monitor the dispersions of Treasury yields because the so-called yield curve has often inverted ahead of recessions.

Investors and analysts say the yield curve has steepened recently in part because of easing trade tensions between the U.S. and China and signs of progress in resolving Brexit, along with continued expectations that the Federal Reserve will keep cutting interest rates.

While long-term yields are largely determined by expectations for economic growth and inflation, short-term yields have been anchored by expectations for rate cuts because they are particularly sensitive to changes in monetary policy.

Write to Sam Goldfarb at sam.goldfarb@wsj.com


(END) Dow Jones Newswires

October 21, 2019 12:00 ET (16:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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