BOND REPORT: Treasury Yields Edge Lower, But On Track To Log Big Monthly Rise

By William Watts and Mark DeCambre, MarketWatch Features Dow Jones Newswires

Treasurys yields edged lower Friday, but were on track to log a big monthly rise as investors wrestle with prospects for a proposed U.S. tax overhaul and the Federal Reserve's commitment to normalize monetary policy despite signs of sluggish inflation.

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What are bond yields doing?

The benchmark 10-year Treasury yield fell 1.4 basis points to 2.295% after hitting an 11-week high earlier in the week. The shorter-dated 2-year note yield traded at 1.447% versus 1.455% Thursday afternoon. Meanwhile, the 30-year bond yield fell 0.9 basis point to 2.861%.

Bond yields move in the opposite direction of prices.

What is moving markets?

The personal-consumption expenditure, or PCE, index, the Federal Reserve's preferred inflation gauge, increased 0.1% in August (http://www.marketwatch.com/story/fewer-auto-sales-dent-consumer-spending-in-august-inflation-still-weak-pce-shows-2017-09-29), while the closely followed core rate, which strips out food and energy, edged up by the same amount. Both measures were flat on a year-over-year basis.

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Consumer spending rose just 0.1% in August after a 0.3% rise in July, matching expectations. Personal income climbed 0.2% versus a forecast of 0.1%.

President Donald Trump's tax proposal continues to dominate discussion, with members of the administration emphasizing that a proposed cut in the corporate income-tax rate to 20% isn't negotiable.

What are bond traders and strategists saying?

Strategists at Barclays led by Jason Goldberg in a Friday research note point out that the so-called term premium between 2-year and 10-year government bonds are at the widest in about 5 weeks. A wider spread between those maturities is often seen as a bullish indicator for financial companies, which borrow on a short-term basis and lend on a longer-term basis.

Which Federal Reserve speakers are ahead

Philadelphia Fed President Patrick Harker will give a speech at 11 a.m. Eastern on the economic outlook as well as on fintech at a conference at his regional bank.

What data are ahead?

Which other assets are moving?

The yield for the 10-year German bond , known as the bund, was at 0.453%, down 2.7 basis points. The sovereign paper is viewed as a gauge of the health of the European economy, because Germany is the largest eurozone economy.

(END) Dow Jones Newswires

September 29, 2017 09:35 ET (13:35 GMT)