U.S. Treasurys Reverse Course After Two-Day Rally

02/07/18 04:47 PM EST
By Akane Otani 

U.S. government bond prices weakened Wednesday following a two-day rally, as swings buffeting global stocks showed signs of easing.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.843%, compared with 2.766% Tuesday.

Yields, which fall as bond prices rise, had declined earlier this week as investors sought the relative safety of Treasurys while stock prices declined sharply. Turbulent trading across markets sent the yield on the 10-year Treasury note to its largest two-day decline since May, while the Dow Jones Industrial Average on Tuesday swung more than 1,000 points from its high to its low.

But on Wednesday, with stocks in Europe rebounding and some major indexes in Asia ending higher, demand for assets that investors tend to pick up during market swings, like gold and Treasury bonds, was muted.

Bond yields rose further after congressional leaders said they had agreed on a budget deal ahead of the government funding deadline later this week, and the Treasury Department's latest auction of 10-year notes was met with tepid demand.

Treasury sold $24 billion worth of 10-year notes Wednesday at a yield of 2.811%, which was slightly higher than traders had expected just before the auction.

Even with recent pullbacks, the yield of the 10-year Treasury note remains near its highest level of the year -- something some investors and analysts have attributed to bets among investors that global growth and inflation are accelerating.

"The big question to look toward is if rates moving higher for a good reason," said David Albrycht, chief investment officer of Newfleet Asset Management. "If rates are moving higher because we have a moderate pickup in growth and inflation, they're going up for the right reasons."

So far, data points to inflation looking "moderately tame," Mr. Albrycht said, suggesting Treasury yields may not have much further to climb in the short term. Various measures of inflation have largely run under the Federal Reserve's 2% target, which investors say should keep the Fed on a moderate course of rate increases.

The yield on the benchmark 10-year U.S. Treasury note was recently at 2.785%, according to Tradeweb, compared with 2.766% Tuesday.

Write to Akane Otani at akane.otani@wsj.com

 

(END) Dow Jones Newswires

February 07, 2018 16:47 ET (21:47 GMT)

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