Government Bonds Strengthen as Geopolitical Tensions Stir Markets
22 September 2017 - 4:47PM
Dow Jones News
By Gunjan Banerji
U.S. government bonds strengthened on Friday after a nine-day
losing streak as geopolitical tensions between the U.S. and North
Korea reverberated through markets.
The yield on the benchmark 10-year U.S. Treasury note slipped to
2.250%, according to Tradeweb, down from 2.278% on Thursday. Yields
fall as bond prices rise.
North Korea's threat to detonate a hydrogen bomb over the
Pacific Ocean stoked investor fears, bringing U.S. strains with
Pyongyang back into the forefront after major stock indexes reached
records earlier this week and government bond prices receded.
President Donald Trump's United Nations speech on Tuesday warned
that the U.S. could "totally destroy" North Korea if it were forced
to defend itself or its allies, leading to a fresh round of hostile
rhetoric between the two countries. In recent weeks, North Korea
has launched two missiles over Japan and tested its most powerful
nuclear device.
"Do you want to be short bonds going into a weekend where North
Korea might launch something?" said John Briggs, head of strategy
at NatWest Markets.
The geopolitical fears echoed through markets. Major U.S. stock
indexes swung around the flatline Friday, as assets considered
safe, like gold, advanced.
Benchmark government bonds had sold off for nine consecutive
days, the longest streak of declines since 2011. Earlier this week,
the Federal Reserve announced its plans to start trimming its
multi-trillion dollar bond portfolio, and policy makers signaled a
majority remained in favor of an additional interest-rate increase
this year.
The outlook on interest rates sent yields on the two-year
Treasury note, which tends to be more sensitive to the Fed's
policies, to 1.442% Thursday -- its highest close since November
2008. The two-year yield declined to 1.439% Friday, according to
Tradeweb.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
September 22, 2017 11:32 ET (15:32 GMT)
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