BOND REPORT: Treasury Yields Hit 5-week Low, Set For 3rd Straight Decline
24 February 2017 - 6:00PM
Dow Jones News
By Joseph Adinolfi, MarketWatch
Uncertainty surrounding fiscal, monetary policy outlooks entices
investors back into U.S. debt
Treasury yields touched their lowest levels in more than five
weeks on Friday as President Donald Trump offered no new details
about his plans for implementing the sweeping economic policies he
has promised.
The yield on the 10-year Treasury note dropped 4.5 basis points
to 2.327%, its lowest level since Jan. 17. The yield on the
two-year note slid 2.3 basis points to 1.161%. The yield on the
30-year bond shed 4.7 basis points to 2.967%. Bond yields move
inversely to prices.
Speaking at the Conservative Political Action Committee hearing
on Friday, Trump reiterated that he plans to invest heavily in
American infrastructure while slashing taxes for businesses and
middle-class families.
His remarks echoed assurances from Treasury Secretary Steven
Mnuchin, who, in a series of interviews from earlier in the week,
noted that the administration plans to enact its tax-reform plans
before Congress's August recess.
The lack of details surrounding Trump's plans has helped support
the battered bond market as investors bet that the economic impact
of any new measures would be limited in 2017.
Treasurys sold off sharply following Trump's Nov. 8 electoral
victory, in part due to the expectation that his administration
would move swiftly to pass sweeping economic reform measures,
including corporate tax cuts, increased infrastructure spending and
deregulation.
Now, investors have begun to second-guess those moves because
the new administration appears to be moving much more slowly than
previously believed, said Kevin Nicholson, chief market strategist
at RiverFront Investment Group.
"The [bond] market is basically discounting the optimism from
the Trump rally," Nicholson said.
Yields have been dropping for three straight days, beginning
after the release of minutes from the Federal Reserve's latest
policy meeting. In the minutes, Fed officials sounded somewhat more
reluctant to raise interest rates than in recent remarks from Fed
Chairwoman Janet Yellen and a bevy of other Fed officials.
Also, lingering tensions between Mexico and the U.S. have helped
entice investors back into safety plays like Treasurys, said
Karissa McDonough, fixed-income strategist at People's Bank.
Secretary of State Rex Tillerson and Department of Homeland
Security Secretary John Kelly visited Mexico earlier in the week
and emphasized their desire to maintain cordial relations between
the two neighboring countries.
"There really is demand for stability and safety when it's not
super clear if there's going to be a border-adjusted tax or how
relations will be carried out with other sovereign nations,"
McDonough said.
Later Friday morning, investors will digest the University of
Michigan's consumer-sentiment survey, as well as comments from
Trump, who is slated to speak at the Conservative Political Action
Conference.
A batch of economic data released on Friday was relatively
sanguine, Nicholson said. Consumer sentiment was strong in
February, though it moved off a 13-year high reached in January.
(http://www.marketwatch.com/story/consumer-sentiment-still-strong-in-february-but-comes-off-13-year-high-2017-02-24)Meanwhile,
new-home sales' jumped 3.7% to 555,000 in January.
(END) Dow Jones Newswires
February 24, 2017 12:45 ET (17:45 GMT)
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