BOND REPORT: Treasury Yields Tick Higher As Consumer-inflation Data Looms

By Mark DeCambre, MarketWatch Features Dow Jones Newswires

10-year U.K. gilt yields jump after BOE decision

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U.S. Treasury prices fell Thursday, extending a multiday rise in yields ahead of a key read of consumer inflation--the final such measure before the Federal Reserve's two-day policy-setting meeting next week.

The yield on the short-term 2-year Treasury note was at 1.364%, compared with 1.355% on Wednesday when it hit its highest level since Aug. 8 (http://www.marketwatch.com/story/treasurys-tread-water-ahead-of-inflation-report-2017-09-13). The 10-year Treasury note yield was at 2.199%, versus 2.194% in the prior session, while the 30-year Treasury bond was at 2.800%, compared with 2.749% Wednesday.

Bond prices and yields move inversely.

Wall Street is awaiting an August reading of the consumer-price index, with economists polled by MarketWatch forecasting a 0.3% rise in August for the inflation gauge. The reading comes a day after the Labor Department's producer-price index for August came in weaker than expected, rising 0.2%.

Wednesday's wholesale inflation report underscored what has been persistent sign of sluggish inflation, running below the Fed's 2% annual target, which some speculating that weakness might keep the central bank from lifting interest rates further in 2017, despite a jobs market that has mostly remained strong. The Fed meeting is set for Tuesday and Wednesday next week.

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Because inflation can chip away at a bond's fixed value over time, signs of weak inflation have tended to support lower yields and higher prices.

The recent period of yields climbing off recent lows, however, has been supported by a slightly lowered perception of global risk factors, including concerns centered on North Korea's military antagonism in the Korean Peninsula and a spate of damaging hurricanes in the U.S., market participants say.

In addition to inflation data, the market is awaiting weekly jobless claims. Average estimates from economists polled by MarketWatch are for weekly increase in claims to 300,000.

Both economic reports are due at 8:30 a.m. Eastern Time.

Some of the rise in yields in Treasurys early comes as the Bank of England on Thursday kept its key interest rate on hold and made no changes to its quantitative-easing program, but warned that rates could rise faster than traders currently are pricing in.

Traders are waiting to see if the uptrend continues in yields, which has coincided with a more buoyant U.S. dollar, up 1.1% so far this week as measured by the U.S. ICE Dollar Index .

"Going forward, it will be important to see if Treasury yields stall out and/or reverse after the recent bounce (after all, yields still remain trending lower) This also has a huge impact as to the efficacy of the financials trade in late September," said Mark Newton, technical market analyst and founder of Newton Advisors, in a Thursday research note.

The yield of the British 10-year government bonds, known as gilts , jumped to 1.190%, compared with 1.139$ before the BOE announcement, as did the pound against the dollar at around $1.33.

(END) Dow Jones Newswires

September 14, 2017 08:07 ET (12:07 GMT)