Treasurys Strengthen as Investors Await Fed News
23 October 2017 - 5:40PM
Dow Jones News
By Daniel Kruger
U.S. government bond prices edged higher Monday as investors
looked for clarity about whom President Donald Trump will nominate
to lead the Federal Reserve.
The benchmark Treasury 10-year note yield fell to 2.372%,
according to Tradeweb, from 2.381% Friday. Bond yields fall when
prices rise.
Analysts said the implications for monetary policy may be
significantly different depending on which candidate President
Trump selects, leading investors to pause. Potential nominees John
Taylor, a Stanford economics professor, and Kevin Warsh, a former
Fed governor, are seen by investors as likely to favor raising
interest rates at a faster pace than the central bank has suggested
it will take.
Current Fed Chairwoman Janet Yellen and central bank Governor
Jerome Powell are seen as more likely to maintain the status quo,
in which the Fed projected three rate increases in 2018. White
House economic adviser Gary Cohn has no record in central banking.
Mr. Trump has said he would like to name his pick before his Nov. 3
trip to Asia.
"People are a little wary of getting out ahead" of a decision
about the Fed's leadership, said Thomas Simons, a money market
economist at Jefferies Group LLC.
Investors are also awaiting the European Central Bank meeting
Thursday, looking for signs about whether policy makers there will
move to slow or curtail the bank's EUR60 billion ($70.5 billion) in
monthly bond purchases. The ECB's three-year-old negative
interest-rate policy and its massive bond purchases have driven
sovereign bond yields in the 19-nation currency bloc to near record
lows, and encouraged investors to seek relatively higher yields in
the U.S.
President Trump's tax overhaul plan, for which details remain
scarce, also has the potential to affect bond prices. Investors
expect that the passage of changes to the tax code would
significantly widen U.S. budget deficits far into the future. The
federal deficit widened in fiscal 2017 to $666 billion, the sixth
highest on record. Bondholders often express concerns about rising
debt levels, which can jeopardize the ability to make timely
payments of principal and interest.
(END) Dow Jones Newswires
October 23, 2017 12:25 ET (16:25 GMT)
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