BOND REPORT: Treasury Yields Continue Lower After Fed Fails To Signal Quicker Pace Of Rate Hikes
21 March 2017 - 7:36AM
Dow Jones News
By Joseph Adinolfi, MarketWatch
Treasury yields declined Monday as the Federal Reserve's
unwillingness last week to signal a more aggressive pace of
interest-rate hikes helped support the battered Treasury
market.
The yield on the 10-year note shed three basis points to 2.472%,
its lowest end-of-day level in three weeks, while the yield on the
two-year note , typically the most sensitive to interest-rate
expectations, declined two basis points to 1.296%. The yield on the
30-year bond shed 2.4 basis points to 3.088%.
Yields, which fall as prices rise, finished lower last week
after the Fed raised its benchmark interest-rate target by a
quarter of a percentage point to a range of between 75 basis points
and 1% -- its second such hike over the past three months.
Typically, such a move would be expected to push yields higher.
But the central bank left its projections for the pace of
interest-rate hikes over the coming year essentially unchanged,
disappointing some investors who had expected the central bank to
signal that future hikes would happen more swiftly than previously
believed.
"I think there was an expectation that the Fed would become
extremely hawkish, and that just wasn't justified," said Gennadiy
Goldberg, interest-rate strategist at TD Securities.
Chicago Fed President Charles Evans said he would support
raising interest rates four times in 2017 if there's a substantial
pickup in inflation
(http://www.marketwatch.com/story/feds-evans-open-to-four-interest-rate-hikes-this-year-if-inflation-flares-2017-03-20).
But his remarks had little impact on the market despite his place
on the Fed's interest-rate-setting committee.
Meanwhile, his colleague, Minneapolis Fed President Neel
Kashkari, explained his rationale behind voting to leave interest
rates on hold last week during an interview with CNBC
(http://www.cnbc.com/2017/03/20/feds-kashkari-says-his-vote-against-rate-hike-is-based-on-lack-of-inflation.html)
on Monday morning, saying he opposed the hike because inflation is
lagging. Kashkari had previously released a statement saying he was
the only Fed policy maker to vote against raising interest rates at
the central bank's meeting last week.
Read:Investors bet the Fed is getting back to 'normal'
(http://www.marketwatch.com/story/investors-bet-the-fed-is-getting-back-to-normal-2017-03-16)
The latest reading from the University of Michigan consumer
confidence survey
(http://www.marketwatch.com/story/consumer-sentiment-still-running-high--except-among-democrats-2017-03-17),
released Friday, also helped rein in yields by showing that
long-term inflation expectations had declined.
Meanwhile, FBI Director James Comey and National Security Agency
Director Michael Rogers both testified before the House
Intelligence Committee on Monday, but their comments appeared to
have little impact on the bond market.
Confirmation hearings for Neil Gorsuch, President Donald Trump's
nominee to succeed Antonin Scalia on the Supreme Court, also began
on Monday.
(END) Dow Jones Newswires
March 20, 2017 16:21 ET (20:21 GMT)
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