BOND REPORT: 10-year Treasury Yield Hits 6-week High After Macron's Win In French Election

By Sunny Oh Features Dow Jones Newswires

30-year Treasury bond edges above 3.0%

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Treasury prices fell, and yields gained, on Monday, after Emmanuel Macron won Sunday's runoff for the French presidential election, dampening geopolitical concerns that the euroskeptic Marine Le Pen would win.

The Treasury yield for the 10-year note ticked up 2.4 basis points higher to 2.376%, its highest in six weeks. Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.

The yield for the 2-year note advanced 1.2 basis point for the fourth consecutive day to 1.330%, the longest winning streak since March 9. Meanwhile, the yield for the 30-year, or the long bond, gained 2.5 basis points to 3.013%.

Macron's decisive defeat of the far-right candidate Le Pen was seen as a litmus test for the wave of populism washing over Europe, temporarily pacifying markets that had grown anxious over a groundswell of support for anti-European Union politicians. Le Pen, for example, had pledged to renegotiate France's terms of its EU membership, threatening the future of the trade bloc and the euro .

See: Investors are breathing a sigh of relief over France, for now (http://www.marketwatch.com/story/investors-are-breathing-a-sigh-of-relief-over-france-for-now-2017-05-07)

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The spread between French and German bond yields , an indicator of the relative risk of investing in French government debt, has narrowed to 41.7 basis points from a high of 78 basis points in February.

"From a capital markets perspective, this was the favored outcome and different from the Brexit vote or the US election in that the polls had it right. Overall, the outcome of this event reduces uncertainty in Europe," said Todd Hedtke, chief investment officer of Allianz Investment Management.

Elsewhere, traders were paying attention to speakers from the Federal Reserve for clues on the pace and timing of interest-rate hikes, following Wednesday's updated policy statement.

St. Louis Fed President James Bullard, a nonvoting member of the Fed, said the target interest rate was close to the so-called Taylor rule recommendation (http://www.marketwatch.com/story/feds-bullard-says-target-interest-rate-is-close-to-where-taylor-rule-recommends-2017-05-08).The rule (http://www.marketwatch.com/story/if-fed-had-followed-taylor-rule-it-would-have-caused-substantial-job-loss-kashkari-says-2017-01-05) was devised by Stanford University economics professor John Taylor and calculates the ideal level for interest rates based on changes in economic variables.

Cleveland Fed President Loretta Mester, also a nonvoting Fed member, said she would be "comfortable" with reducing the balance sheet this year and that the central bank needed to be "very vigilant against fall behind" (http://www.marketwatch.com/story/feds-mester-warns-against-going-too-slow-with-interest-rate-hikes-2017-05-08) on rate increases.

Looking ahead, the Treasury Department will auction $189 billion of U.S. government paper, including $72 billion in 13-week and 26-week paper that was sold on Monday. The influx of new supply can weigh on bond prices with comparable tenures and drive yields higher.

Check out the auction calendar ahead:

(END) Dow Jones Newswires

May 08, 2017 16:35 ET (20:35 GMT)