U.S. Government Bonds Advance Before Inflation Data
14 February 2018 - 4:33AM
Dow Jones News
By Daniel Kruger
Longer-term U.S. government bond prices rose Tuesday, a day
ahead of the release of inflation data that some expect may mark a
turning point in market sentiment.
The yield on the benchmark 10-year Treasury note fell to 2.837%,
according to Tradeweb, from 2.857% Friday. Bond yields fall when
prices rise.
Investors have tightened their focus on inflation data after a
Labor Department report earlier this month said that wages rose
2.9% in January on a year-over-year basis, surpassing most
forecasts, and spurring speculation across financial markets that
the Federal Reserve could raise interest rates more than the three
times it forecast for 2018. Investors sold both stocks and bonds in
the wake of that report, and the moves signaled a return of
volatility to asset prices.
Economists surveyed by The Wall Street Journal expect
Wednesday's consumer-price index, which measures changes in what
Americans pay for everything from milk to airline fares, to rise by
1.9% in January from the year-earlier period.
Investors have been looking for confirmation that inflation is
rising, which would support this year's move higher in bond yields.
The 10-year Treasury yield ended 2017 at 2.409%, and has been
pushed higher by expectations for faster growth and inflation
following the passage of a $1.5 trillion tax cut bill at the end of
last year. An increase in government borrowing has also increases
expectations for yields to rise.
"There's a lot of reasons" for yields to rise, said Thomas di
Galoma, managing director and head of Treasury trading at Seaport
Global Holdings. The gain in prices today is a result of "some
nervousness about the equity market," with investors preparing for
potential volatility that could appear after the inflation data, he
said.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
February 13, 2018 12:18 ET (17:18 GMT)
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