U.S. Government Bonds Advance Before Inflation Data

Date : 14/02/2018 @ 04:33
Source : Dow Jones News

U.S. Government Bonds Advance Before Inflation Data

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)

Copyright (c) 2018 Dow Jones & Company, Inc.
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