U.S. Government Bond Prices Decline After Brief Rally
20 November 2017 - 4:10PM
Dow Jones News
By Sam Goldfarb
U.S. government bonds edged lower Monday as investors were quick
to book profits following an overnight rally.
In recent trading, the yield on the benchmark 10-year Treasury
note was 2.363%, compared with 2.352% Friday.
Yields, which fall when bond prices rise, declined overnight
after the small, pro-business Free Democratic Party broke off talks
to form a coalition government in Germany.
The rally, however, was short-lived, as investors determined
that "the German economy is strong enough to withstand this little
hiccup," said John Canavan, market analyst at Stone and McCarthy
Research Associates.
This has the potential to be a quiet week in the Treasurys
market, according to analysts. The market is closed Thursday for
Thanksgiving, and the most notable economic release is a report on
durable goods orders Wednesday.
One factor that could upset the calm is investors' shifting
appetite for riskier assets. After holding strong for most of the
year, demand for assets such as stocks and junk-rated corporate
bonds has wavered in recent weeks, offering support for Treasurys,
which tend to benefit when investors adopt safer strategies.
Another wild card involves Congress. After the House passed a
sweeping tax overhaul bill last week, the focus is now on the
Senate, where Republicans can afford few defections as they
consider similar legislation.
Many investors and analysts said that Treasury yields would rise
if either the House or Senate bill became law, in part because they
would boost the federal budget deficit, requiring the government to
issue more bonds. A change in tax laws could potentially spur some
economic growth, causing investors to favor riskier assets. And it
could boost inflation, which is a main threat to government bonds
because it chips away at the purchasing power of their fixed
returns.
The Senate is expected to vote on tax legislation after
Thanksgiving.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 20, 2017 10:55 ET (15:55 GMT)
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