BOND REPORT: Treasury Yields Climb Amid Brexit Deal Drama

Date : 10/21/2019 @ 5:31PM
Source : Dow Jones News

BOND REPORT: Treasury Yields Climb Amid Brexit Deal Drama

By Sunny Oh

Auctions for $113 billion of Treasury debt will be held this week

U.S. Treasury yields pushed higher Monday as U.K. Prime Minister Boris Johnson was prevented from holding a vote on his agreement dictating the country's exit from the European Union, presenting another complication to the deal's passage.

What are Treasurys doing?

The 10-year Treasury note yield rose 4.9 basis points to 1.799%, while the 2-year note rate was up 3.3 basis points to 1.609%. The 30-year bond yield picked up 4.6 basis points to 2.294%.

In the last few weeks, the benchmark maturity's rate has remained in a tight range between 1.5% and 1.9% since the beginning of September, as positive developments on geopolitical uncertainty has been balanced against the growing gloom around the U.S.'s economic health.

Prices for U.S. government debt fall as yields rise.

What's driving Treasurys?

Bond markets recently have been moving in step with uncertainty surrounding Britain's plans to exit from the European Union, with Johnson renewing his efforts to get his Brexit deal ratified after a Saturday setback. But House of Commons Speaker John Bercow blocked the Prime Minister from holding a second vote on his proposal.

On the weekend, Johnson's bill was postponed by lawmakers, and then stymied by an amendment ensuring that any kind of agreement to leave the EU would have to pass through the House of Commons, the lower chamber of British Parliament. Johnson later asked EU officials for a three-month extension, but analysts say he will be looking to push for a deal before Oct. 31.

The 10-year U.K. government bond yield rose 4.7 basis points to 0.756%, Tradeweb data show.

Investors were also buoyed by President Donald Trump's comments on the prospect of a U.S.-China trade deal, which he said was coming along great on Monday (https://t.co/cWKkw7O8SI?amp=1).

Mario Draghi will preside over his last meeting as the president of the European Central Bank this week. This comes as signs of friction (http://www.marketwatch.com/story/draghi-will-leave-lagarde-a-warring-ecb-2019-10-10) within its monetary policy-making committee have surfaced over the risks around additional easing in an ultralow interest rate environment.

Also in focus, auctions for $113 billion of Treasury debt will be held this week. U.S. government debt auctions can influence the price of outstanding bonds as broker-dealers make room for the influx of fresh debt issuance.

What did market participants' say?

"We think the uncertainty at present will prevent larger market moves, particularly as it appears now even more likely that the government can push the actual deal through the House of Commons. In either case, a near-term 'no deal Brexit' seems very unlikely indeed," wrote Peter Schaffrik, global macro analyst for RBC Capital Markets.

The struggle to push a Brexit agreement through Parliament "doesn't change much for investors. This is all about tactics," said Chris Iggo, chief investment officer of core investments at AXA Investment Managers, in an interview with MarketWatch.

 

(END) Dow Jones Newswires

October 21, 2019 13:16 ET (17:16 GMT)

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


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