BOND REPORT: Treasury Yields Rise As Investors Look Ahead To Fed Policy Meeting
March 19 2018 - 9:53AM
Dow Jones News
By Sunny Oh
Treasury yields rose Monday as investors geared up for a Federal
Reserve policy meeting this week that's seen as virtually certain
to deliver a rate increase.
How are Treasurys doing?
The 10-year Treasury note yield climbed 2.6 basis points to
2.874%. The 2-year note yield rose 2.6 basis points to 2.320%. The
30-year bond rate was up by 2.3 basis points to 3.104%.
Bond prices move in the opposite direction of yields.
What's driving Treasurys?
A lack of economic data ahead of Wednesday's policy meeting will
keep investors focused on the Federal Reserve. This will be the
first meeting chaired by Jerome Powell since he succeeded Janet
Yellen at the helm of the central bank in early February. He will
also hold his first news conference as chairman. The policy
statement will also be accompanied by the so-called dot plot, an
aggregate of policy makers' forecasts for future interest rates.
Analysts consider a quarter percentage point hike a near-certainty,
with the futures market pricing in the increase to 100%.
Once the Fed's portfolio-cutting measures reaches its full
scale, analysts at the Council on Foreign Relations estimated the
bond market will have to absorb long-dated Treasury issuance worth
5 percent of GDP every year. Concerns that this removal of monetary
accommodation will remove a backstop on falling bond prices have
kept a few investors on edge.
What did market participants say?
"As the Fed's balance sheet continues to shrink at an increasing
rate, the Treasury Department is flooding the front-end of the
market with supply, and credit spreads are edging higher (albeit
off of extremely low levels), the specter of more meaningful
fallout from the 'gradual' removal of accommodation looms," said
Ian Lyngen and Aaron Kohli, fixed-income strategists at
MarketWatch.
What else is on investors' radar?
The European Union agreed Monday on terms
(http://www.marketwatch.com/story/eu-agrees-on-two-year-brexit-transition-deal-2018-03-19)
of Britain's two-year transition deal after leaving the bloc in
March 2019, according to an EU official familiar with the
discussions. The decision will give British lawmakers 21 months to
complete their terms of exit.
The European Central Bank is beginning to start discussions on
the rate increase path as even the doves on the Executive Board,
its policy-making committee, have accepted its bond-buying program
should end this year, Reuters reported
(https://www.reuters.com/article/us-ecb-policy/ecb-debate-shifting-to-interest-rate-path-from-qe-sources-idUSKBN1GV1DT).
What other assets are on the move?
The yield for the British 10-year government bond rose 6.4 basis
points to 1.499%. The German 10-year bond yield was up by 3.0 basis
points to 0.600%.
(END) Dow Jones Newswires
March 19, 2018 09:38 ET (13:38 GMT)
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