BOND REPORT: Treasury Yields On Track To Notch 1st Weekly Rise In A Month
21 January 2017 - 8:15AM
Dow Jones News
By Joseph Adinolfi, MarketWatch
Investors are bracing for President-elect Donald Trump to take
the oath of office
Treasury yields on Friday didn't see sizable action on the day,
but notched their first weekly rise in a month, after President
Donald Trump took the oath of office.
The yield on the 10-year Treasury note rose 0.6 basis point on
Friday, and 8.7 basis points this week, to finish at 2.466%. The
yield on the two-year note fell 0.3 basis point on Friday to
1.225%, but finished the week 0.2 basis point higher, its second
weekly gain in the past three. The yield on the 30-year bond
climbed 1.1 basis point to 3.046%, up seven basis points on the
week. Bond yields, which move inversely to prices.
The recent climb in yields suggest that a spate of buying in
bonds that has pushed yields lower has run out of steam, said Tom
Tucci, managing director and head of Treasury trading at CIBC World
Markets Corp.
"Part of the run-up was a short covering bid just because there
wasn't any new information," Tucci said. "There has been a lot of
talk about what Trump will push through, but there is still no hard
facts on infrastructure spending or tax cuts."
A short-covering rally occurs when investors, who had borrowed
an asset and sold it with the expectation that the price would
drop, rush to buy them back before losses accrue. Trump's election
win in November unleashed a spate of selling in Treasurys on the
back of pro-growth policy proposals, including an increase in
fiscal spending, that would be bearish for bonds.
Trump's inaugural address on Friday
(http://www.marketwatch.com/story/the-full-text-of-president-donald-trumps-inaugural-address-2017-01-20),
in which he said he would promote "America first," echoed a
protectionist stance he has maintained for the better part of his
campaign, but didn't provide any new insights into his legislative
agenda.
On the week, Treasury notes took their cues from Federal Reserve
Chairwoman Janet Yellen, who said late Thursday, and at other
occasions during the week, that there are few signs that the
economy is overheating, and that she sees no reason to rapidly
raise interest rates.
"The bottom line is: the market is still pricing in the
potential of the Fed raising rates three times this year," Tucci
said. The Fed raised interest rates in December for the second time
in a decade. A set of projections released concurrently with its
interest-rate decision last month showed a plurality of Fed policy
makers expect to raise rates three times in 2017, up from two in
September.
Philadelphia Federal Reserve President Pat Harker, a voting
member of the Fed's rate-setting committee, on Friday reiterated
Yellen's view on the pace of rate increases.
(END) Dow Jones Newswires
January 20, 2017 16:00 ET (21:00 GMT)
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