BOND REPORT: 2-year Yield Approaches 1.70% As It Notches Fresh 9-year High

By Sunny Oh Features Dow Jones Newswires

2-year Treasury yield highest since Oct. 20, 2008

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Short-dated Treasury yields advanced higher Monday after investors continued to pile on bets that the central bank would raise rates even in the absence of stronger inflation numbers.

What are yields doing?

The two-year note yield rose 2.9 basis points to 1.687%, its highest since Oct. 20. 2008. The 10-year note yield was unchanged at 2.400%, while the 30-year bond yield fell close to one basis point to 2.869%. Bond prices move in the opposite direction of yields.

What's driving Treasurys?

Short-dated Treasury yields continued to rise amid growing anticipation that the Federal Reserve would raise rates even if a pick-up in inflation failed to materialize. Traders betting on higher interest rates may get confirmation of their suspicions on Tuesday at a panel discussion with Fed Chairwoman Janet Yellen, European Central Bank President Mario Draghi, Bank of England Gov. Mark Carney and Bank of Japan Gov. Haruhiko Kuroda.

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See: Here are the seven Fed speeches that matter this wee (http://www.marketwatch.com/story/here-are-the-seven-fed-speeches-that-matter-this-week-2017-11-13)k (http://www.marketwatch.com/story/here-are-the-seven-fed-speeches-that-matter-this-week-2017-11-13)

That has helped flatten the yield curve, a line tracing a bond's yields against its maturities. The curve flattens when the gap between short-dated yields and long-dated yields narrows. But if October's consumer price index numbers are higher than expected on Wednesday, that could pause the flattening move.

U.S. tax-overhaul negotiations between House Republicans (http://www.marketwatch.com/story/house-to-vote-on-its-version-of-tax-bill-this-week-kelly-says-he-doesnt-follow-trumps-tweets-2017-11-13) and their counterparts in the Senate remain key to setting the direction of the market's movement for the week. The wide differences between the tax plans drawn up by the House and the Senate has drawn concerns that a viable tax bill may not see passage by the end of the year.

Read: How much punch will the economy get from tax reform? (http://www.marketwatch.com/story/how-much-punch-will-the-economy-get-from-tax-reform-2017-11-13)

What are market participants saying?

"Price action was uneventful, although it did represent the return of the curve-flattening trend that we've seen throughout the last several weeks, to leave many pondering [how] much further the move has to extend," said Ian Lyngen and Aaron Kohli, interest-rate strategists at BMO Capital Markets.

What else is on investors' radar?

What are other assets doing?

U.K. bonds saw buying after reports that Conservative lawmakers were ready to issue a vote of no confidence against British Prime Minister Theresa May, weakening her already tenuous position and undermining her ability to negotiate a favorable deal for Britain to leave the European Union. The infighting within the ruling Conservative party's ranks has fanned uncertainty about the negotiation process, and has stoked buying of assets perceived as safe.

Also check out: How an unsent letter to Theresa May is driving the pound lowe (http://www.marketwatch.com/story/how-an-unsent-letter-to-theresa-may-is-driving-the-pound-lower-2017-11-13)

The 10-year U.K. government yield fell 1.8 basis point to 1.326%, while the pound weakened 0.6% to $1.312 (http://www.marketwatch.com/story/pound-slides-as-british-government-faces-turmoil-2017-11-13).

(END) Dow Jones Newswires

November 13, 2017 16:45 ET (21:45 GMT)