BOND REPORT: Treasury Yields Budge Up Above 2.25% After OPEC Meeting

By Sunny Oh Features Dow Jones Newswires

10-year Treasury yields fluctuates around 2.25%

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Treasury yields fell after a meeting of the Organization of the Petroleum Exporting Countries showed members had agreed on a nine-month extension to its previous production cuts.

The yield for the 10-year Treasury note gained 0.4 basis point to 2.256%. Bond prices move inversely to yields. The 2-year note added 0.4 basis point to 1.290%, while the 30-year note, or the long bond, rose 0.3 basis point to 2.928%.

Treasury yields showed little response to OPEC's meeting as the length of the extension was widely anticipated. Deeper production cuts, however, might have pushed oil prices higher, analysts said, and lifted Treasury yields through higher inflation expectations. Although, the correlation between energy prices and rates have slowly been eroded, oil prices can ultimately lift consumer prices.

West Texas Intermediate for July delivery fell 1.5% to $50.58 a barrel, putting it on track for the lowest settlement level in a week.

See: Oil slides below $51 as OPEC agrees on 9-month output extension (http://www.marketwatch.com/story/oil-reverses-some-losses-as-investors-get-ready-for-opec-meeting-2017-05-25)

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On the data front, the trade deficit for April widened to $67.6 billion in April from $65.1 billion in March, falling below the expectation of $64 billion from economists surveyed by MarketWatch. The number of Americans applying for unemployment benefits for the week rose by 1,000 to 234,000 from the week ended May 20 (http://www.marketwatch.com/story/low-jobless-claims-look-like-rerun-of-early-1970s-2017-05-25). While the four-week jobless claims average fell by 5,750 to 235,250, the lowest since April 1973.

Yields rose after investors interpreted the falling number of initial jobless claims as a sign of a solid job market. Economists, however, have been mostly scratching their heads as to when hourly earnings and wages will rise, with the U.S. economy settling at 4.4% unemployment, a level considered near or at full employment.

Traders will look ahead to a docket of Fed speakers. Fed. Gov. Lael Brainard will participate in a panel discussion at 10 a.m. Eastern. St. Louis Fed President James Bullard, a nonvoting member of its interest-rate setting committee, will give a talk on economics and monetary policy in Tokyo, Japan at 9 p.m. Eastern.

The Treasury Department will auction off $28 billion of 7-year notes. New sales of U.S. government paper can influence prices and yields for the outstanding Treasurys market.

(http://www.marketwatch.com/story/oil-reverses-some-losses-as-investors-get-ready-for-opec-meeting-2017-05-25)

(END) Dow Jones Newswires

May 25, 2017 09:34 ET (13:34 GMT)