Treasurys Edge Lower As Attention Shifts to Auctions, Fed Meeting

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bonds pulled back Friday, tracking toward their third straight session of declines, as traders continued to pare back bets that had driven yields to their lowest level in nearly seven months.

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In recent trading, the yield on the benchmark 10-year Treasury note was 2.225%, according to Tradeweb, compared with 2.195% Thursday. Yields rise as bond prices fall.

Demand for Treasurys was lessened by a couple of factors Friday, including the lifting of political uncertainty related to the U.K. general elections and testimony from former FBI Director James Comey, both of which took place Thursday.

In addition, investors are preparing for an influx of new Treasury debt early next week. Auctions of three- and 10-year notes and 30-year bonds are slated to take place over Monday and Tuesday. That will be followed by the conclusion the two-day Federal Reserve meeting on Wednesday.

Investors widely expect the central bank to raise short-term interest-rates at the meeting. But there is a risk that officials could use the meeting to try to raise expectations about future rate increases, which have declined in recent weeks in the wake of soft economic data.

The market is "pricing in a June rate hike and nothing else beyond that, so risks, in my view are significantly skewed toward some hawkish repricing of expectations," said Bruno Braizinha, senior interest rate strategist at Société Générale SA.

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The 10-year Treasury yield fell to 2.147% Tuesday, the lowest close since Nov. 10, 2016. Since climbing above 2.6% in early March, the yield has declined in part due to dimming prospects for fiscal stimulus, as President Donald Trump has been hit by a series of negative reports related to his firing of Mr. Comey and investigations into Russian interference in the 2016 election.

Mr. Comey's testimony before the Senate Intelligence Committee, in which he detailed interactions with Mr. Trump in the months leading up to his dismissal, was eagerly anticipated by investors but ultimately had little impact on the bond market.

Written testimony released Wednesday had already removed some of the drama from the event and was generally seen by investors as not damaging enough to threaten Mr. Trump's position in the White House.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

U.S. government bonds edged lower Friday, marking the third straight session of declines, as traders continued to pare bets that had driven yields to their lowest level in nearly seven months.

The yield on the benchmark 10-year Treasury note settled at 2.201%, compared with 2.195% Thursday. Yields rise as bond prices fall.

Demand for Treasurys was hurt by a couple of factors, including the lifting of political uncertainty related to the U.K. general elections and testimony from former FBI Director James Comey.

Investors also were preparing for an influx of new Treasury debt early next week. Auctions of three- and 10-year notes and 30-year bonds are slated to take place over Monday and Tuesday. That will be followed by the conclusion the two-day Federal Reserve meeting on Wednesday.

Investors widely expect the central bank to raise short-term interest-rates at the meeting. But there is a risk that officials could use the event to raise expectations about future rate increases, which have ebbed in the wake of soft economic data.

The market is "pricing in a June rate hike and nothing else beyond that, so risks, in my view, are significantly skewed toward some hawkish repricing of expectations," said Bruno Braizinha, senior interest rate strategist at Société Générale SA.

Treasurys began Friday's session in worse shape than how they ended it. The yield on the 10-year note rose to 2.227% in the morning, but fell during the day, as a selloff of technology stocks helped boost appetite for assets viewed as safe.

The yield settled Tuesday at 2.147%, the lowest close since Nov. 10, 2016.

Bonds have benefited in recent weeks in part due to dimming prospects for fiscal stimulus, as President Donald Trump has been hit by a series of negative reports related to his firing of Mr. Comey and investigations into Russian interference in the 2016 election.

Mr. Comey's testimony on Thursday before the Senate Intelligence Committee, in which he detailed interactions with Mr. Trump before his dismissal, was eagerly anticipated by investors. But it ultimately had little impact on the bond market.

Written testimony released Wednesday removed some of the drama from the event and was generally seen by investors as not damaging enough to threaten Mr. Trump's position in the White House.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

June 09, 2017 16:01 ET (20:01 GMT)