BOND REPORT: Treasury Yields Tick Higher As Investors Settle In For Jackson Hole

By Sunny Oh Features Dow Jones Newswires

ECB's Draghi and Fed's Yellen to speak Friday at symposium

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Treasury yields rose slightly on Thursday as the gathering of global central bankers in Jackson Hole, Wyo., got under way, overshadowing a raft of data that had set off some earlier turbulence in bond markets.

Investors said they were waiting for speeches Friday from European Central Bank President Mario Draghi and Fed Chairwoman Janet Yellen, among other monetary policy makers at the economic symposium.

Also read: Here's what investors will be watching when Draghi, Yellen speak at Jackson Hole (http://www.marketwatch.com/story/heres-what-investors-will-be-watching-when-draghi-yellen-speak-at-jackson-hole-2017-08-22)

The 10-year Treasury yield rose 2.3 basis points to 2.194%. The yield for the 2-year note added 2 basis points to 1.330%, while the 30-year bond's yield edged higher by 2 basis points to 2.768%. Bond prices move in the opposite direction of yields.

Yields held on to their climb in choppy trade after a mixed set of data. First-time claims for unemployment benefits crawled higher by 2,000 to 234,000 for the week ending Aug. 19 (http://www.marketwatch.com/story/us-jobless-claims-inch-up-from-six-month-low-2017-08-24), but in the more stable four-week gauge, fell 2,000 to 238,000. On the back of a weaker-than-expected new home sales (http://www.marketwatch.com/story/new-home-sales-skid-to-7-month-low-in-july-2017-08-23) number for July, existing-home sales fell to 5.44 million (http://www.marketwatch.com/story/existing-home-sales-tumble-to-2017-low-as-supply-crunch-bites-2017-08-24), their lowest level of the year. Investors eye existing sales figures more closely as they are a larger and more reliable gauge of the housing market's health.

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Aaron Kohli, a fixed-income strategist at BMO Capital Markets, said the existing-home sales data should command attention as it makes up 34% of the basket of goods tracked to calculate the monthly consumer price inflation number.

"We're watching for any sign of weakness in shelter costs, which have been responsible for holding up CPI in the past few months even as other elements weakened," he said.

See: Existing-home sales tumble to 2017 low as supply crunch bites (http://www.marketwatch.com/story/existing-home-sales-tumble-to-2017-low-as-supply-crunch-bites-2017-08-24)

The ins and outs of inflation have come back into focus as central bankers deal with the puzzling absence of price growth amid a global economic recovery. All 45 countries monitored by the Organization for Economic Cooperation and Development are set to grow this year, a once-in-a-decade lock-step move, according to The Wall Street Journal (https://www.wsj.com/articles/global-economies-grow-in-sync-1503507503). Yet inflation in the G-20, a group of the world's largest industrial and developing economies, slipped to 2%, its lowest level in close to eight years.

It's why market participants are watching reports out of the Kansas City Fed's Jackson Hole Economic Symposium, where Draghi and Yellen will give speeches, for further clarification on the inflation outlook.

"For the U.S., it's a more curious case [than Europe]. It's hard to see much slack out there and not more wage pressure than it has. No one really knows why inflation is low there," said Luke Bartholomew, fixed-income strategist for Aberdeen Standard Investments.

He referred to the perplexing trend of labor markets reaching their tightest levels in 16 years at the same time that U.S. core inflation has posted several months of sub-2% readings.

Market participants also want details on how Draghi intends to wind down the ECB's 60 billion euro ($70.8 billion) monthly asset-purchasing program.

But the likelihood of Draghi using Jackson Hole to announce less accommodation has shrunk markedly. Reuters previously reported (https://www.reuters.com/article/global-forex-draghi-idUSL8N1L21QQ)that he did not intend to use the conference to signal a major policy move as he would want to avoid strengthening the euro, which makes it difficult for central banks to shift away from monetary easing.

(END) Dow Jones Newswires

August 25, 2017 13:18 ET (17:18 GMT)