BOND REPORT: Treasury Yields Mostly Flat Ahead Of ISM Services Gauge

By Sunny Oh Features Dow Jones Newswires

10-year yield remains below 2.10%

Continue Reading Below

Treasury prices were little changed Wednesday, leaving yields relatively flat, as investors prepared for economic data amid uncertainty surrounding another incoming hurricane and growing geopolitical risks from North Korea.

The benchmark 10-year Treasury note yield ticked lower to 2.067%, from 2.072% in the previous session. The 2-year Treasury note yield was traded at 1.294%, versus 1.292% on Tuesday. While, the 30-year bond yield was virtually unchanged at 2.690%. Bond prices move inversely to yields.

Bond investors suggested the lack of direction in Wednesday's trading session could be down to traders consolidating their positions after heavy bond-buying pushed long-dated Treasury yields to fresh 10-month lows on Tuesday (http://www.marketwatch.com/story/treasury-yields-slip-as-north-korea-triggers-demand-for-havens-2017-09-05). Amid a streak of unsettling developments from the North Korean regime's nuclear capabilities and concerns about Hurricane Irma as Texas deals with the devastation left by Hurricane Harvey., investors have snapped up government paper and assets perceived as havens.

See: 'Potentially catastrophic' Hurricane Irma makes landfall in the Caribbean (http://www.marketwatch.com/story/potentially-catastrophic-hurricane-irma-makes-landfall-in-the-caribbean-2017-09-06)

The natural disasters refuse to relent with Hurricane Irma making landfall in the Caribbean. Bond investors have speculated that the damages from Hurricane Harvey and, subsequently, Irma would leave the U.S. economy with sizable bruises, tamping down on inflation pressures. Federal Reserve Gov. Lael Brainard said in speech on Tuesday (http://www.marketwatch.com/story/fed-may-have-to-slow-interest-rate-hikes-given-subdued-inflation-brainard-2017-09-05)that Harvey would "raise uncertainties about the economic outlook for the remainder of the year."

Continue Reading Below

The combination of concerns have helped to overshadow a raft of economic data slated for release in the morning. The U.S. economy logged a smaller trade deficit of $43.7 billion, falling below the $44.8 billion from economists surveyed by MarketWatch, after both imports and exports showed a slight decline.

"Net external trade is still on course to provide a modest positive contribution to third-quarter GDP growth," said Paul Ashworth, chief U.S. economist for Capital Economics.

Traders were more interested in the ISM nonmanufacturing data, a gauge of the service industry's health, at 10 a.m. Eastern. The Fed's Beige Book will also be released at 2 p.m., but few analysts expect anything new from the collection of anecdotes. Previous iterations have flagged issues of tight labor markets but also tepid wage growth, a conundrum for central bankers who need higher pay checks to justify an exit away from accommodative monetary policy.

Elsewhere, investors are gearing up for key monetary policy meetings held by the European Central Bank and the Bank of Canada.

Deutsche Bank's CEO John Cryan advised the European Central Bank (http://www.marketwatch.com/story/deutsche-bank-ceo-urges-ecb-to-end-cheap-money-era-2017-09-06-74851710)to begin cutting down its asset-purchases, citing concerns that an era of cheap money had stoked asset bubbles "in more and more parts of the capital market, where we wouldn't have expected them." But analysts feel the ECB President Mario Draghi will try to avoid spooking markets in Thursday's meeting by highlighting the importance of keeping quantitative easing in place.

Analysts are divided on whether the Bank of Canada will go forward with its second rate increase in its current tightening cycle. It's decision will be announced at 10 a.m. Eastern. But the surge in growth, which ran at 4.5% annualized rate (http://www.marketwatch.com/story/canada-is-fastest-growing-g-7-member-after-45-gdp-surge-2017-08-31) in the second quarter of this year, has put pressure on the central bank to normalize interest rates.

The Canadian 10-year government bond was up 2 basis points to 1.882%. Meanwhile, the German 10-year government bond was flat at 0.337%.

(END) Dow Jones Newswires

September 06, 2017 09:35 ET (13:35 GMT)