U.S. Government Bonds Little Changed

By Akane Otani Features Dow Jones Newswires

U.S. government bonds were little changed Monday, ending the month roughly where they started.

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The yield on the 10-year U.S. Treasury note settled at 2.292%, compared with 2.291% on Friday and 2.298% at the end of June. Yields fall as bond prices rise.

Government bonds have traded in a narrow range in July as investors have increasingly taken the view that global central banks won't rush to raise interest rates, given a recent streak of soft inflation data. Concerns that central banks would move away from highly accommodative monetary policy even as economic momentum was slowing triggered a selloff in global bonds at the end of June.

Bonds have recovered more recently, however, as central bank officials in the U.S. and Europe have highlighted a slowdown in inflation -- leading investors to believe the Federal Reserve will be cautious in tightening monetary policy.

That should keep Treasurys range-bound for now, investors and analysts have said, especially if the chances of major fiscal stimulus from Washington, D.C., such as tax cuts, don't materially change.

"There's only so much that yields can rise in the U.S. when you have a very low inflation environment and a Fed that's not going to be aggressive," said John Briggs, head of strategy for the Americas at NatWest Markets.

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Elsewhere, German government bonds weakened slightly after data showed core inflation in the eurozone growing by 1.2% in July, slightly faster than analysts expected. Inflation tends to weaken demand for government bonds since it chips away at the purchasing power of their fixed returns.

The yield on the 10-year German government bond was recently at 0.541%, according to Tradeweb, up from 0.539% on Friday.

Later this week, investors' focus will turn to the monthly jobs report. Economists surveyed by The Wall Street Journal expect the report will show nonfarm payrolls rising by 180,000 in July and average hourly wages ticking up by 0.3%. Signs of accelerating wage growth could put pressure on bonds, although many traders have said they are expecting tepid figures again.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

July 31, 2017 16:09 ET (20:09 GMT)