BOND REPORT: Treasury Yields Rise As Investors Gear Up For Midweek Fed Meeting
24 July 2017 - 2:58PM
Dow Jones News
By Sunny Oh
Treasury yields ticked up Monday as market participants prepared
for a midweek Fed policy meeting that could help set the stage for
the tapering of the central bank's $4.5 trillion balance sheet.
The yield on the 10-year Treasury note moved up 0.3 basis point
to 2.244%. The 2-year note's yield rose 0.8 basis point to 1.353%,
while the 30-year bond yield rose 1.2 basis point to 2.823%.
Yields backed up to pare last week's decline ahead of a two-day
meeting of Federal Reserve policy makers that begins Tuesday.
Although investors expect few changes
(http://www.marketwatch.com/story/stocks-brace-for-volatility-as-earnings-peak-weak-fed-meeting-loom-2017-07-22)
to the language of the policy statement, they will closely watch
for signs that weakening economic data have unnerved members of the
interest-rate setting committee. Market participants still expect
the central bank to signal its plans to reduce its balance sheet in
September on Wednesday, even as it pushes back the schedule for
higher rates.
"The FOMC appears to have put rate normalization on the back
burner for the time being," wrote Ward McCarthy, chief financial
economist for Jefferies, referring to the central bank's Federal
Open Market Committee.
Though the tapering of the Fed's bloated balance sheet has left
some jittery about the potential impact
(http://www.marketwatch.com/story/will-the-feds-balance-sheet-unwind-catch-investors-by-surprise-2017-05-03)
on the Treasury market, other argue the gradual rate of the balance
sheet roll-off is unlikely to trigger investors' flight from the
largest market for government paper in the world.
Read:Jamie Dimon says QE unwind could catch investors by
surprise
(http://www.marketwatch.com/story/jamie-dimon-says-qe-unwind-could-catch-investors-by-surprise-2017-07-11)
The International Monetary Fund lon Sunday lowered its U.S.
growth forecast for 2017 to 2.1% from 2.3% as economists cut their
expectations for Trump's pro-growth agenda to juice the economy.
This reflected that "fiscal policy will be less expansionary going
forward than previously anticipated," according to their World
Economic Outlook update
(http://www.imf.org/en/Publications/WEO/Issues/2017/07/07/world-economic-outlook-update-july-2017).
On the other hand, growth estimates for Europe were raised with the
exception of the U.K.
See: IMF cuts U.S. growth forecast for 2017, 2018
(http://www.marketwatch.com/story/imf-cuts-us-growth-forecast-for-2017-2018-2017-07-24)
Traders will look ahead to existing home sales data set for
release at 10 a.m. Eastern. Over the week, the Treasury Department
will also sell $88 billion of U.S. government paper in tenors
ranging from 2-year to 7-year. Auctions can influence price and
trading for Treasurys by flooding the market with new issuance,
raising rates.
(END) Dow Jones Newswires
July 24, 2017 09:43 ET (13:43 GMT)
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