BOND REPORT: Treasury Yields Bounce Back After Comey Statement

Investors brace for 'Super Thursday' of potential market-moving events

Treasury yields bounced back on Wednesday, with the benchmark 10-year note rising from a seven-month low after the release of a written statement by former Federal Bureau of Investigation Director James Comey a day ahead of his appearance before a Senate panel.

The yield on the 10-year Treasury note climbed 3.3 basis points to 2.180%, after closing Tuesday at its lowest level since Nov. 10. Bond prices move inversely to yields; one basis point is one hundredth of a percentage point.

The yield on the 2-year note added 1.6 basis point to 1.314%, its highest level in four weeks, while the yield on the 30-year bond, or the long bond, rose 2.7 basis point to 2.838%.

On a day lacking economic data, the release of Comey's remarks ahead of a Senate hearing gave the main impetus to a modest selloff in Treasurys. In the statement (http://www.marketwatch.com/story/full-text-of-comeys-prepared-senate-testimony-2017-06-07), Comey did not make allegations connecting President Donald Trump directly to Russia.

"Comey's prepared statements took a bit of edge out of the market earlier. From what we're seeing, there isn't a smoking gun as far is Trump is concerned," said Tom Tucci, head of U.S. Treasurys trading at CIBC World Markets.

He will appear in front of a Senate panel on Thursday to give testimony on a range of topics, including investigations into Russia's alleged meddling in the 2016 election.

See: What to watch when James Comey testifies to the Senate on Thursday (http://www.marketwatch.com/story/what-to-watch-when-james-comey-testifies-to-the-senate-on-thursday-2017-06-05)

Other sources of geopolitical turmoil include the increasingly uncertain U.K. general election (http://www.marketwatch.com/story/this-is-the-worst-that-could-happen-to-the-pound-in-the-uk-election-and-its-not-jeremy-corbyn-2017-06-07) on Thursday as Prime Minister Theresa May's Conservatives saw a formerly large lead in the polls against the opposition Labor Party shrink. Analysts say a slimmer Conservative majority would undermine May's mandate and her negotiating position as she looks for favorable terms as the U.K. gives up its EU membership.

On the same day, the European Central Bank will hold its policy meeting. Investors are expecting a slightly more hawkish tilt to language used by the ban (http://www.marketwatch.com/story/draghis-ecb-may-take-baby-steps-toward-ending-ultraloose-monetary-policy-2017-06-06)k (http://www.marketwatch.com/story/draghis-ecb-may-take-baby-steps-toward-ending-ultraloose-monetary-policy-2017-06-06) in preparation for a tapering of its asset purchase program. But there could be little change to the status quo, with the eurozone finding it tough to reach the ECB's 2% inflation target (http://www.marketwatch.com/story/euro-slumps-after-report-ecb-will-cut-inflation-outlook-through-2019-2017-06-07).

(http://www.marketwatch.com/story/euro-slumps-after-report-ecb-will-cut-inflation-outlook-through-2019-2017-06-07)"Investors will look to the ECB for plans to end monetary stimulus, something Draghi's team seems hesitant to do, as economic data remains mixed, though slanted towards the positive," said Jody Lurie, director of fixed-income strategy at Janney Montgomery Scott, in a note.

The slump in oil prices after an unexpected rise in U.S. crude inventories (http://www.marketwatch.com/story/us-oil-data-shocks-the-market-in-more-ways-than-one-2017-06-07) did little to stem Thursday's yield gain. Treasury yields tend to closely follow energy prices, a proxy of inflation expectations which can affect the value of bond's fixed interest payments. Analysts have noted, however, the close ties between the two indicators have faded.

(END) Dow Jones Newswires

June 07, 2017 16:33 ET (20:33 GMT)