U.S. Government Bonds Edge Lower After Monday's Gains

By Sam Goldfarb Features Dow Jones Newswires

U.S. government bonds edged lower Tuesday, retracing some of Monday's gains, as investors focused on a slate of public appearances by Federal Reserve officials.

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In recent trading, the yield on the benchmark 10-year Treasury note was 2.236%, according to Tradeweb, compared with 2.220% Monday. Yields rise when bond prices fall.

Demand for Treasurys softened a day after the 10-year yield logged its largest one-day decline since Sept. 7, reflecting heightened tensions between the U.S. and North Korea and surprisingly strong showings by far right and left political parties in German elections.

Analysts attributed the pullback in part to looming debt sales. The Treasury Department is scheduled to auction off two-year Treasurys Tuesday, followed by five-year notes Wednesday and seven-year notes Thursday.

Traders were also keeping a close eye on Cleveland where Fed Chairwoman Janet Yellen is scheduled to speak on the economy and monetary policy. That will follow remarks at the same event by Federal Reserve Bank of Cleveland President Loretta Mester and appearances elsewhere by president of the Federal Reserve Bank of Atlanta, Raphael Bostic, and Fed governor Lael Brainard.

"We've got a number of Fed speakers including Yellen today, so that's really taking center stage as well as supply" of new debt, said Daniel Mulholland, head of U.S. Treasury trading at Crédit Agricole. "The market got a little bit ahead of itself yesterday and is kind of pulling back a bit."

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Declines in the 10-year yield on Monday and Friday followed a nine-day string of increases, prompted in part by rising expectations that the Fed could raise interest rates for a third time this year despite a recent run of soft inflation data.

Fed officials, at the conclusion of their latest policy meeting last week, indicated that they still expect to raise rates once more this year and three times next year, though their median projection for the longer-run level of interest rates edged down to 2.75% from 3% in June -- much lower than the endpoint of previous rate-rising cycles.

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

(END) Dow Jones Newswires

September 26, 2017 10:58 ET (14:58 GMT)