BOND REPORT: Treasury Yields Rise As Investors Look Ahead To June Rate Hike

By Sunny Oh Features Dow Jones Newswires

Treasury prices fell Thursday, allowing yields to continue their rise a day after Federal Reserve policy makers indicated the central bank would gradually hike rates this year, helping to overcome some investor's suspicions that weak economic data would stay the Fed's hand on future increases.

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The yield on the 10-year note moved up 2.1 basis points to 2.341%. Bond prices move inversely to yields.

The yield for the 2-year note budged up 1.2 basis point to 1.31%, while the yield for the 30-year or the long bond, advanced 1.5 basis point to 2.983%.

Federal Reserve policy makers voted to keep rates steady on Wednesday, as expected, while the language in the statement was seen by analysts as indicating the central bank remained on track to raise rates two more times this year. The Chicago Mercantile Exchange's FedWatch tool shows traders gauged the probability of June rate hike as high as 78.5%. Higher interest rates are bearish on bond prices.

Elsewhere, German government bonds, or bunds, sold off ahead of the final round of France's presidential election on Sunday. Pundits anticipate the centrist Emmanuel Macron to comfortably win the face-off against far-right candidate Marine Le Pen, with early polling suggesting a sizable margin has opened up between the two candidates. But uncertainty over the outcome has prompted some investors to pull out of European government paper when they rally.

See: Brace for market mayhem if Le Pen unexpectedly wins French presidency (http://www.marketwatch.com/story/brace-for-market-mayhem-if-le-pen-unexpectedly-wins-french-presidency-2017-05-04)

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The 10-year bund yield jumped 4.8 basis points to hit a seven-day high of 0.374%, even as French assets saw mild selling with the French 10-year benchmark bond yield rising 1.5 basis point.

A wave of data is hitting traders on Wednesday beginning with initial jobless claims, a measure of how many new individuals file to receive state unemployment benefits, slipping 19,000 to notch 238,000 claims (http://www.marketwatch.com/story/us-jobless-claims-fall-sharply-in-latest-week-2017-05-04) for the week ended April 29. Unit-labor costs also climbed 3% in the first quarter. Analysts pay attention to both measures as less labor slack and higher wages could signal imminent inflation, which has a corrosive effect on the value of bond payments. Treasury yields continued their ascent after the spate of data releases.

The U.S. Census Bureau will also release data on durable goods orders at 10 a.m. Eastern. The indicator can give a clue of how busy factories are likely to be in the near future.

(END) Dow Jones Newswires

May 04, 2017 09:37 ET (13:37 GMT)