Treasurys Strengthen Into Holiday
21 November 2017 - 5:02PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds strengthened Tuesday as investors
continued to bet that inflation will remain soft as the Federal
Reserve raises interest rates.
In recent trading, the yield on the benchmark 10-year Treasury
note was 2.361%, according to Tradeweb, compared with 2.370%
Monday. Yields fall when bond prices rise.
Over the past month, the dominant theme in the Treasury market
has been a shrinking gap between yields on short-term bonds and
longer-term bonds, known on Wall Street as a flattening yield
curve.
While the 10-year yield has barely moved, suggesting investors
see little risk of rising inflation, the yield on the two-year note
has climbed steadily higher, reflecting expectations that the
Federal Reserve will keep raising interest-rates.
With the Thanksgiving holiday approaching, several traders said
they didn't expect a major move in the Treasurys market this week,
though light trading volumes could occasionally lead to small,
sudden changes in yields.
As an example, the 10-year yield fell to 2.336% early in the
U.S. trading session from 2.359% less than an hour earlier but then
was quickly back up above 2.350%, according to Tradeweb.
"It seems like a lot of the [trading] desks have started to be
very thinly staffed," said Aaron Kohli, interest-rate strategist at
BMO Capital Markets.
"The real interesting thing," he added, "is what happens next
week," when the Treasury Department will conduct three
note-auctions over the two days, while the Senate could vote on a
sweeping tax overhaul.
Many investors and analysts expect Treasury yields to rise if
Congress passes a tax bill, in part because the legislation under
consideration would add to the federal budget deficit. That would
require the government to sell more bonds, weighing on the prices
of outstanding debt.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 21, 2017 11:47 ET (16:47 GMT)
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