Treasurys Pull Back As Investors Favor Riskier Assets

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bonds pulled back Monday as investors favored riskier assets amid reduced concerns about the North Korean nuclear threat.

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In recent trading, the yield on the benchmark 10-year Treasury note was 2.210%, according to Tradeweb, compared with 2.191% Friday.

Yields, which rise as bond prices fall, climbed in the overnight session while global stocks gained in a reversal of their moves from last week when investors grew more anxious about a possible military confrontation between the U.S. and North Korea.

President Donald Trump sent jitters through the financial markets last Tuesday when he said the U.S. would respond with "fire and fury" to further provocations from North Korea. On Sunday, however, the Pentagon's top military officer said the U.S. remained focused on finding a diplomatic solution to the crisis, while other Trump administration officials also said a war isn't imminent.

"The world seems a little safer right now than it maybe did late last week going into the weekend," said Timothy High, senior U.S. interest-rate strategist at BNP Paribas.

Despite Monday's move, Treasury yields still remain at the bottom end of their 2017 range. While geopolitical concerns have driven some recent buying of government bonds, the market has also been supported by a run of soft inflation data, which has led investors to further scale back expectations for interest-rate increases from the Federal Reserve.

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Investors bought bonds Friday after the Labor Department said the consumer price-index increased 0.1% in July from the previous month, below the 0.2% gain anticipated by economists surveyed by The Wall Street Journal.

Soft inflation helps boost Treasurys by preserving the purchasing power of their fixed payments and decreasing the likelihood that the Fed will raise interest rates.

Federal-funds futures, used by investors to place bets on the Fed's rate-policy outlook, on Monday showed a roughly 37% chance of a rate-increase by the end of the year, down from 47% a week ago, according to CME Group data.

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

(END) Dow Jones Newswires

August 14, 2017 11:37 ET (15:37 GMT)