Treasurys Edge Down as Fed Meeting Kicks Off

By Gunjan Banerji Features Dow Jones Newswires

U.S. government bonds edged down on Thursday as investors awaited clues from the Federal Reserve's annual retreat this week in Jackson Hole, Wyo.

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In recent trading, the yield on the benchmark 10-year Treasury note was 2.183%, according to Tradeweb, compared with 2.171% Wednesday. Yields rise when bond prices fall.

A jobless claims report released Thursday morning showed that the number of Americans filing fresh applications for unemployment benefits rose slightly last week, but remains low. Initial jobless claims ticked up by 2,000 to a seasonally adjusted 234,000, slightly less than the 235,000 new claims The Wall Street Journal expected.

Investors are watching for hints about monetary policy at the Jackson Hole symposium, which starts Thursday and will feature speeches from Federal Reserve Chairwoman Janet Yellen and European Central Bank President Mario Draghi on Friday. The Fed has laid out plans to shrink its asset holdings and to raise interest rates one more time this year.

People are "waiting and seeing" what the Federal Reserve is going to do, said Karissa McDonough, a fixed income strategist at People's United Wealth Management. "I've been pretty surprised by how well Treasurys have held up."

Continued foreign demand for U.S. Treasurys alongside recent demand for assets perceived as safe has also supported government debt, said Ms. McDonough.

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Meanwhile, climbing yields for some Treasury bills expiring in October indicates investor jitters that the U.S. government fail to raise the debt ceiling by then, said Marques Mercier, a senior portfolio manager for Invesco, though adding that he doesn't expect a default on government debt. The yields for Treasury bills expiring in October yield more than those due in early November, according to Tradeweb.

Congress must raise the government's borrowing limit this fall, Treasury officials have said. If it doesn't, it risks defaulting on its debt or missing payments for salaries and benefits.

This week President Donald Trump threatened a government shutdown at a Phoenix, rally to secure funding for a wall along the Mexican border. On Thursday morning, Mr. Trump blamed congressional Republicans for a "mess" this fall as lawmakers seek to raise the government's borrowing limit.

"Because of the DNA of this administration, and Congress's inability to pass some of the policies anticipated this year, that may increase the uncertainty of a resolution passing swiftly," said Mr. Mercier.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

(END) Dow Jones Newswires

August 24, 2017 13:56 ET (17:56 GMT)