By Joseph Adinolfi, MarketWatch
Eurozone debt flat ahead of Thursday's ECB meeting
NEW YORK (MarketWatch) -- Treasury yields closed higher Monday
after a measure of U.S. core inflation met expectations, and gauges
of manufacturing activity in Europe delivered a positive
surprise.
The core personal consumption-expenditures index
(http://www.marketwatch.com/story/consumers-spend-less-save-more-at-start-of-2015-2015-03-02)
increased by 0.1% in January, in line with a consensus forecast
from economists polled by MarketWatch, despite larger-than-expected
declines in personal income and consumer spending.
The PCE is the Federal Reserve's preferred gauge of inflation,
said Tom Tucci, managing director and head of treasury trading at
CIBC World Markets Corp.
German manufacturing expanded more quickly than economists had
expected, according to Germany's purchasing managers' manufacturing
index for February. The improved outlook for Europe increased the
appeal of risky assets like stocks.
The yield on the 10-year note recorded its largest one-session
gain in two weeks, closing 8.1 basis points higher at 2.083%,
according to data from Tradeweb.
The yield on the two-year note was up 3.6 basis points to
0.662%. The yield on the 30-year bond added 8.5 basis points to
2.685%.
The 10-year yield closed higher on Friday, snapping three days
of declines and clinching its largest one-month yield gain since
June 2013.
Bond yields move inversely to prices.
New corporate issuance also weighed on Treasury prices Monday,
Tucci said. Pharmaceutical company Actavis announced $20 billion in
new debt Monday, which could draw investors away from the sovereign
debt market.
Bond investors are looking ahead to Friday's nonfarm payrolls
report for February, with a focus on average hourly earnings data,
wrote David Keeble, head of interest-rate strategy at Crédit
Agricole. Analysts polled by MarketWatch expect the report to show
the U.S. economy added 238,000 new jobs in February.
European debt yields moved higher Monday, with the yield on the
10-year bund closing 2.9 basis points higher at 0.357%, ahead of
Thursday's European Central Bank meeting. Investors expect the ECB
to announce its first purchase of 60-billion euros in private and
public debt at a news conference following the meeting.
The ECB is also expected to release revised economic-growth
forecasts, which could further rattle bond markets, as signs of
renewed growth could undermine demand for "safe" assets like
sovereign debt.
"With a new set of economic forecasts, there is an added kick to
this week's ECB meeting, in part because it is the first time in a
while that some forecasts, particularly growth, would have to be
raised," Keeble wrote in a research note.
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