U.S. Government Bonds Gain as Home-Builder Sentiment Drops
20 November 2018 - 8:48AM
Dow Jones News
By Sam Goldfarb
U.S. government-bond prices extended recent gains Monday after a
gauge of U.S. home-builder confidence fell below expectations.
The yield on the benchmark 10-year U.S. Treasury note settled at
3.059%, its lowest close since Oct. 2, compared with 3.074%
Friday.
Yields, which fall when bond prices rise, initially climbed
overnight. But they slipped as U.S. stocks opened lower and dropped
further after the National Association of Home Builders said its
housing-market index dropped by eight points to a reading of 60 in
November, underscoring builders' rising concerns over climbing
interest rates and home prices.
Economists surveyed by The Wall Street Journal had expected an
index reading of 67 this month. Soft economic data generally help
bolster U.S. Treasurys by increasing demand for safer assets and
lowering expectations for future interest-rate increases by the
Federal Reserve.
The drop in yields Monday followed substantial declines last
week, when a series of comments from Fed officials caused investors
to lower their forecasts for interest-rate increases.
In an interview on CNBC Friday, Federal Reserve Vice Chairman
Richard Clarida said the central bank should take a
"data-dependent" approach to raising rates. He also cited slowing
global economic growth as a factor in his outlook and said interest
rates were getting closer to a so-called neutral level, where they
neither spur economic growth nor slow it down.
Mr. Clarida's comments came a day after Federal Reserve Bank of
Atlanta President Raphael Bostic said the Fed should take a
"tentative approach" to raising rates. Fed Chairman Jerome Powell
also said last week that the central bank was monitoring a modest
deceleration of global growth and volatility in the financial
markets, though he didn't say that either development was enough
right now to change the Fed's current policy of gradually
tightening monetary policy.
Some analysts expect Treasury yields to rebound before long.
Investors have "had a serial problem of underestimating the Fed in
the last two years and I think they're at the risk of doing it
again," said Thomas Simons, senior vice president and money-market
economist in the Fixed Income Group at Jefferies LLC.
Mr. Simons added that "this week is probably going to be one
where the market is more reactive than proactive" given a relative
lack of economic data and expected commentary from Fed
officials.
The bond market will be closed Thursday for Thanksgiving and
will close early on Friday.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 19, 2018 16:33 ET (21:33 GMT)
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