BOND REPORT: Treasury Yields Extend Weeklong Gains As North Korea Risk Abates Further

By Sunny Oh Features Dow Jones Newswires

10-year Treasury yields edges closer to 2.30%

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Treasury prices fell, driving yields higher, on Tuesday as investors off-loaded their holdings of U.S. government paper after North Korea backpedaled on its threat to launch a missile attack at Guam, easing geopolitical concerns that have strengthened the bid for stocks and other assets perceived as risky.

The benchmark 10-year Treasury yield climbed 3.5 basis points to 2.254%, extending the previous session's gain of 2.6 basis points. Bond prices move inversely to yields.

The 30-year Treasury bond's yield rose 2.9 basis points to 2.836%, while the shorter 2-year note's yield dipped 1.2 basis points to 1.334%.

North Korea's leader Kim Jong Un said he might not launch a missile attack on Guam, according to the country's state media. But he warned that he could change his mind "if the Yankees persist in their extremely dangerous reckless actions."

The de-escalation of a threats added momentum to Monday's selloff as investors continued an exodus from Treasurys.

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"For the time being, markets have taken solace in the 'return to neutral corners,'" said Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets.

See: North Korea steps back from plan to launch missiles at Guam (North%20Korea%20steps%20back%20from%20plan%20to%20launch%20missiles%20at%20Guam)

The selling pressure heated up after retail sales for July came in at a 7-month high of 0.6% (http://www.marketwatch.com/story/us-retail-sales-soar-in-july-to-7-month-high-2017-08-15), beating the 0.4% consensus forecasts from economists surveyed by MarketWatch. Indicators suggesting stronger growth and, thus, inflation can erode the value of bonds' fixed payments. Retail sales have been an important contributor to consumer spending and growth pressures, but the figures have been anemic in the past few months.

The Bureau of Labor Statistics reported import prices grew by 0.1% in July (http://www.marketwatch.com/story/cost-of-imported-goods-rise-for-first-time-in-three-months-2017-08-15), the first time in three months and well above economists' expectations of a 0.2% fall. While, the Empire State index, (http://www.marketwatch.com/story/empire-state-factory-index-throttles-to-highest-in-nearly-three-years-2017-08-15) a barometer for manufacturers' health in New York state, surged 15 point to 25.2, a 3-year high in August.

Elsewhere, U.K's inflation numbers came in weaker than expected (http://www.marketwatch.com/story/uk-consumer-inflation-remains-at-26-in-july-2017-08-15), stalling at a 2.6% annual growth rate in July. The tepid data calls into question Bank of England Gov. Mark Carney's remarks two weeks ago that investors were making light of the central bank's planned pace of rate increases.

The yield for the 10-year U.K. government bond , known as gilts, rose 3.2 basis points to 1.106%.

(END) Dow Jones Newswires

August 15, 2017 09:33 ET (13:33 GMT)