BOND REPORT: Treasury Yields Tick Higher After Jobless Claims, PPI

By Sunny Oh Features Dow Jones Newswires

Yellen will appear before the Senate Banking Committee at 10 a.m. Eastern.

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Treasury yields broadly rose after economic data showing tepid inflation pressures amid a tight labor market cast doubt on the Fed's plans to tighten monetary conditions.

The 10-year treasury yield rose 1.8 basis point to 2.338%. The 2-year note's yield budged up 0.4 basis point to 1.351%, while the 30-year bond added 1.6 basis point to 2.899%. Bond prices move inversely to yields.

On economic data, the number of Americans filing for first-time unemployment benefits slipped 3,000 to 247,000 last week (http://www.marketwatch.com/story/us-jobless-claims-drop-3000-to-247000-2017-07-13), but the four-week initial jobless claims average, the less volatile gauge, rose 2,250 to 245,750. Meanwhile, producer prices rose 0.1% (http://www.marketwatch.com/story/us-wholesale-inflation-up-slightly-in-june-but-no-longer-rising-rapidly-ppi-shows-2017-07-13), yet the rapid pace of growth in the 12-month PPI slowed to 2% from 2.4%.The figures show slack continues to linger in the labor market even as pressures on inflation diminish.

Traders will watch Fed Chairwoman Janet Yellen as she appears before the Senate Banking Committee at 10 a.m. Eastern. On Wednesday, she reiterated her expectations for a "gradual" increase in interest rates as the factors holding down the neutral policy stance, the long-term resting point for the fed-funds rate, abate.

See: Live blog and video of Yellen's testimony before senate panel (http://blogs.marketwatch.com/capitolreport/2017/07/12/live-blog-and-video-of-yellens-testimony-before-house-panel/)

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Following up, Fed. Gov. Lael Brainard will speak on the balance sheet at 1 p.m. On Tuesday, Brainard has said she would wait to see how inflation data develops before deciding on the timing for the next interest rate increase. Similar to Yellen, she said the reduction of the Fed's $4.5 trillion portfolio of government bonds and mortgage-backed securities should start soon. Analysts have taken this as a sign that the process of winding down its monetary stimulus will begin in September.

The Treasury Department will auction off a $12 billion of 30-year bonds later at the same time. Although sales of government bonds can affect trading in the marketplace, fixed-income analysts said demand is likely to be tepid.

(END) Dow Jones Newswires

July 13, 2017 09:09 ET (13:09 GMT)