U.S. Government Bonds Slip as Irma Weakens

By Akane Otani Features Dow Jones Newswires

U.S. government-bond prices slipped Monday, as investors regained appetite for riskier assets like stocks.

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The yield on the 10-year U.S. Treasury note was recently at 2.117%, according to Tradeweb, compared with 2.058% on Friday. Yields rise as bond prices fall.

Treasury prices fell alongside other assets considered safer stores of value, like gold and the Japanese yen, after early estimates suggested damage from Hurricane Irma would be less severe than analysts had initially feared.

Concerns over Irma, which made landfall in the U.S. before being downgraded to a tropical storm, had sent Treasury yields to fresh lows for the year. Bond yields had also fallen after some analysts warned that North Korea could launch another intercontinental ballistic missile over the weekend -- a development that would have renewed fears of an escalation in the country's nuclear program.

The fact that there was no such launch, and that analysts have downgraded their hurricane damage estimates, helped stoke appetite for stocks on Monday while putting pressure on government bond prices, said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management. Treasurys tend to attract money during times of economic or political uncertainty.

"Although the storm caused a lot of damage, it didn't appear to be the worst-case scenario," Mr. Heckman said, adding that Treasurys have swung on short-term developments in recent sessions.

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Later this week, bond investors will get another look at inflation, with the producer-price index expected to be released on Wednesday and the consumer-price index scheduled for Thursday.

While various measures of the U.S. economy have picked up this year, inflation readings have remained largely muted, adding to investors' view that the Federal Reserve will be unlikely to raise rates quickly.

That's helped keep yields in a narrow range, despite expectations at the start of the year that policy changes from the Trump administration would kick-start economic growth and inflation and in turn, sap demand for Treasurys. The yield on the 10-year note finished 2016 at 2.446%.

"We think the market will continue to trade in a tight range until we see changes on the inflationary front," Mr. Heckman said.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

September 11, 2017 10:25 ET (14:25 GMT)