Treasurys Extend Recent Declines

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bonds edged lower Friday, extending recent declines amid fresh signs of a shift to tighter monetary policy by major central banks.

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The yield on the benchmark 10-year Treasury note settled at 2.202%, compared with 2.199% Thursday and 2.058% last Friday.

Yields, which rise when bond prices fall, climbed overnight as a key Bank of England policy maker said the central bank may need to raise interest rates in the coming months in response to building inflation pressures.

U.K. government bond yields rose sharply after the comments from Gertjan Vlieghe, dragging yields on government bonds higher in other markets. Treasurys then pared losses after the Commerce Department said U.S. retail sales fell 0.2% in August from the prior month.

After setting fresh 2017 lows last week, Treasury yields have climbed in recent days, reflecting waning concerns about the economic impact of Hurricane Irma and signs of a possible end to the recent inflation slowdown.

Once investors determined that Hurricane Irma wouldn't be as damaging as they had feared, there was "a sentiment change" in markets that "carried through this entire week," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co.

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A report Thursday showed that U.S. consumer prices rose last month at the strongest rate since January, a sign that inflation could be picking up after months of weakness just in time for the Federal Reserve's September 19-20 policy meeting.

The somewhat brighter outlook for inflation helped modestly lift investors' expectations that the Fed could raise interest rates once more this year. The yield on the two-year Treasury note, which is especially sensitive to changes in monetary policy, climbed to 1.384% Friday from 1.270% a week earlier, marking its largest weekly gain since early March.

Yields ticked higher Friday despite a string of events that analysts said might have pushed them lower on other days.

A new missile test by North Korea had little impact on the market, while investors also registered little reaction to a subway bombing in London.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

September 15, 2017 16:52 ET (20:52 GMT)