10-year Treasury yield rests below 2.30%
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Treasury yields rose as investors weighed remarks by Federal Reserve policy makers to see if the U.S. central bank would remain on track to raise interest rates despite tepid first quarter economic numbers.
The yield on the 10-year Treasury note gained 1.0 basis point to 2.254%. Bond prices move inversely to yields; one basis points equals one hundredth of a basis point. The yield for the policy-sensitive 2-year note added 0.1 basis point to 1.279%, and the yield for the 30-year bond rose 1.2 basis point to 2.915%.
Yields rose as President Donald Trump continued on his first international trip, at least temporarily taking attention away from investigations over administration ties to Russia. Analysts say the administration's pro-growth agenda could be derailed as the Russia probes continue, lowering inflation expectations, which could be bullish for bonds. But Fed officials, so far, have given no hints they're penciling in any impact from U.S. political turmoil.
"None of the speakers [last] week made comments about threats to the economy stemming from the ongoing drama in Washington," said Thomas Simons, senior money market economist for Jefferies, in a note. "For now they view this tension as a temporary sideshow."
The diminished geopolitical concerns fed into the European sovereign debt market. The yield on the 10-year German government bond, or bund , rose 2.7 basis points to 0.394%, while the 10-year French government bond yield climbed 3.5 basis points to 0.844%.
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Traders will eye a packed calendar for senior Fed officials as the probability of a June rate increase heads close to 100%, according to the Chicago Mercantile Exchange's FedWatch tool (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). Members of the Fed have cleared the path to tighten monetary policy by down-playing the tepid first-quarter data in May's policy statement (http://www.marketwatch.com/story/fed-to-signal-rate-hike-plan-in-place-despite-soft-economic-data-2017-04-27).
But recently members of the Fed's interest-rate setting committee have sent mixed messages to investors, perhaps belying a lack of consensus that the statement has originally suggested.
The central bank will release its minutes from the May policy meeting on 2 p.m. Eastern Wednesday, which could clarify the mixed messages investors have received from different members of the Fed's interest-rate setting committee.
See: Fed minutes may quell doubt about a June interest-rate hike (http://www.marketwatch.com/story/fed-minutes-may-quell-fresh-doubts-about-a-june-rate-hike-2017-05-19)
Last week, St. Louis Fed President James Bullard, though a nonvoting member in 2017, called for a slower pace for monetary tightening (http://www.marketwatch.com/story/feds-bullard-questions-need-for-june-rate-hike-2017-05-19). He labeled the current timetable of two further rate increases as "aggressive" in light of recent weakness in economic data. In contrast, Dallas Fed President Robert Kaplan, a voting member, maintained his call for two more rate increases despite the soft consumer-price index readings in March and April.
See: Fed's Kaplan backs view for two more rate hikes this year (http://www.marketwatch.com/story/feds-kaplan-backs-view-for-two-more-rate-hikes-this-year-2017-05-22)
Fed Gov. Lael Brainard will give a speech on opportunity and inclusion in the U.S. economy at 7:30 p.m. Eastern. Chicago Fed President Charles Evans, a voting member, will address a private symposium in Shanghai at 9:10 p.m. Eastern.
(END) Dow Jones Newswires
May 22, 2017 16:57 ET (20:57 GMT)