U.S. Government Bonds Fall Ahead of Fed Meeting
24 September 2018 - 10:34PM
Dow Jones News
By Daniel Kruger
U.S. government bond prices swung between gains and losses
before falling Monday on signs that conditions are improving for
the global economy, curbing demand for safe assets.
The yield on the benchmark 10-year Treasury note snapped a
two-session streak of declines, settling at 3.078% from 3.068%
Friday. Yields rise as bond prices fall.
Yields rose in early trading after comments from European
Central Bank President Mario Draghi suggested that the European
economy may be poised to accelerate, adding to optimism about the
global economy.
Demand for the safety of government bonds has waned after
central bankers in Argentina and Turkey began raising interest
rates to reign in rapid inflation. Some analysts said previously
weak responses by policy makers in those countries were leading to
sharp declines in their currencies, while also raising concerns
their troubles could spill over to other emerging-market
economies.
Rate increases in those economies have encouraged investors to
view events in the context of an expanding global economy, and they
have recently been willing to overlook some softness in U.S. data
relating to consumer prices and retail sales, analysts said. Weak
inflation helps support the value of government bonds by preserving
the purchasing power of their fixed payments.
"There's been a change in sentiment," said Christopher Sullivan,
chief investment officer at the United Nations Federal Credit
Union.
Investors are also looking ahead to the Federal Reserve's
meeting Tuesday and Wednesday, where policy makers are widely
expected to raise interest rates for a third time this year,
analysts said. Investors will be looking at the projections of
policy makers on the economy and the path of interest-rate policy
for 2021, which officials will be offering for the first time.
Fed officials have penciled in three rate increases for 2019,
though many investors have said they are uncertain whether policy
makers will interrupt the trend of quarterly rate raises at some
point next year to reconsider their options.
Yields retraced an early advance Monday after news reports said
that Deputy Attorney General Rod Rosenstein was likely to leave the
Trump administration. Yields rose again after the White House said
President Trump and Mr. Rosenstein would meet Thursday to discuss
Mr. Rosenstein's status.
Investors could see Mr. Rosenstein's departure as a sign that
Mr. Trump could end the investigation into Russian election
interference, which could add "a pretty big source of uncertainty"
to financial markets, said Priya Misra, head of global rates
strategy at TD Securities.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
September 24, 2018 17:19 ET (21:19 GMT)
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