BOND REPORT: 10-year Treasury Yield Hits 7-month High As Traders Await Fed Pick

By William Watts, MarketWatch Features Dow Jones Newswires

Treasurys continued to weaken Wednesday, pushing the yield on the benchmark 10-year note to its highest level since March, as investors await President Donald Trump's pick to head the Federal Reserve once Chairwoman Janet Yellen's term ends in February.

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What are yields doing?

The yield on the 10-year Treasury note rose 2.6 basis points to 2.444%, hitting its highest mark since March 21, according to FactSet. The 2-year Treasury rose 0.8 basis point to 1.611%, while the 30-year Treasury bond yield was up 2 basis points at 2.954%. Yields rise as Treasury prices decline.

What's driving the market?

Trump on Monday said he was very close to announcing his decision on Fed leadership. In a meeting Tuesday with Republican senators on Capitol Hill, Trump asked for a show of hands (http://www.marketwatch.com/story/trump-asked-senate-republicans-who-should-be-next-fed-chair-and-john-taylor-reportedly-was-the-winner-2017-10-24) on who they though should be the next Fed chair, with Stanford economist John Taylor, who is seen as likely to take a more hawkish approach, the apparent winner.

Read:Can a Powell-Taylor ticket at the top of the Fed really work? (http://www.marketwatch.com/story/can-a-powell-taylor-ticket-at-top-of-the-fed-really-work-2017-10-23)

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(http://www.marketwatch.com/story/can-a-powell-taylor-ticket-at-top-of-the-fed-really-work-2017-10-23)Investors are also awaiting a Thursday meeting of the European Central Bank that's expected to see President Mario Draghi unveil a plan to begin tapering the bank's monthly asset buying program in January.

See:Mario Draghi needs to avoid a 'taper tantrum' when the ECB meets (http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)

(http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)Also read:Why Italy faces the worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)

(http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)

What are market participants saying?

"Major bond markets face a possible triple whammy over the next week or so. President Trump could reveal a more hawkish Fed line-up, the ECB could taper bond purchases back significantly and the Bank of England could lift the base rate for the first time in a decade," said Steven Barrow, currency and fixed-income strategist at Standard Bank. "But while bonds may wobble on these threats we don't expect yields to soar at this stage."

Barrow argued that scope for a bond selloff, and a rise in yields, is limited by inflation's continued failure to show up.

What's on the economic calendar?

Data on durable goods orders for September is due at 8:30 a.m. Eastern. Economists surveyed by MarketWatch produced a consensus forecast for a rise of 0.7% after a 2% rise in August. At 10 a.m. Eastern, figures on September new home sales are due, with analysts looking for transactions to come in at a 555,000 annual rate versus 560,000 in August.

See:MarketWatch Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

(http://www.marketwatch.com/economy-politics/calendars/economic)Economic Preview: Here's the kind of spending that leads to bigger paychecks and a roaring economy (http://www.marketwatch.com/story/heres-the-kind-of-spending-that-leads-to-bigger-paychecks-and-a-roaring-economy-2017-10-21)

(END) Dow Jones Newswires

October 25, 2017 08:22 ET (12:22 GMT)