BOND REPORT: Treasurys See Buying As Investors Await Fed Minutes

By Sunny Oh Features Dow Jones Newswires

Treasury prices rose, pushing yields lower, on Tuesday as investors braced for the Fed minutes from September's policy meeting on Wednesday.

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What are government bonds doing?

The 10-year Treasury note yield slipped to 2.333% from 2.370% on late Friday in New York. The 2-year Treasury note yield was down to 1.488% from 1.511%, while the 30-year Treasury bond yield fell to 2.869% from 2.907%. Bond prices move in the opposite direction of yields.

Treasurys weren't traded on Monday in observance of Columbus Day (http://www.marketwatch.com/story/columbus-day-which-markets-are-closed-2017-10-09).

What is driving markets?

Traders are pricing in an 87% chance of a quarter-percentage point rate increase by the Federal Reserve when it convenes in December, data from CME Group show (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). Investors, meanwhile, will await the minutes from the policy setting Federal Open Market Committee's September meeting, where further clues about monetary policy might be gleaned. At the meeting, the majority of its members were in favor of an additional rate increase this year (http://www.marketwatch.com/story/text-of-september-fomc-statement-2017-09-20), according to a plot of policy maker's projections, known as the dot plot.

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Meanwhile, the Catalan parliament is meeting on Tuesday (http://www.marketwatch.com/story/a-reprieve-in-spain-catalonia-tensions-gives-investors-a-break-for-now-2017-10-09). If they declare independence, it could lead to a flare-up in regional tensions between the government accused of resorting to heavy-handed tactics and the regional government which has ignored the Spanish constitution. Heightened geopolitical concerns could push investors to funnel money into government paper and assets perceived as safe.

What do market participants say?

"I really think that people are coming to their senses a bit, and they're saying we're not going to see higher rates after all. Especially, if we get some geopolitical risk like the Catalan independence and the North Korean situation," said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities. He suggested the recent selloff seen last Friday was overstretched, when the 10-year Treasury yield threatened to break past key psychological level of 2.40%.

"The FOMC Minutes may offer insight on the Fed's current hawkish policy lean," wrote Aaron Kohli, interest-rate strategist for BMO Capital Markets in Tuesday note. "The minutes will provide an opportunity for a broader range of opinions on the near-term headwinds in the real economy to be voiced."

Which central bankers are on the docket?

What data is on investors' radar?

How are other assets doing?

The dollartipped lower after the euro strengthened from (http://www.marketwatch.com/story/dollar-loses-ground-as-euro-climbs-on-tapering-hopes-2017-10-10) hawkish comments by Lautenschalger. A currency tends to strengthen when expectations for tighter monetary policy grow. Geopolitical tensions between U.S. and North Korea continued to stir up appetite for haven assets, with gold futures (http://www.marketwatch.com/story/gold-rises-on-track-for-longest-string-of-gains-in-5-weeks-2017-10-10) on track for the longest win streak in five weeks and the Japanese yen strengthening.

(END) Dow Jones Newswires

October 10, 2017 12:48 ET (16:48 GMT)