U.S. Government Bond Yields Fall With Global Stocks

By Akane Otani Features Dow Jones Newswires

U.S. government bond prices climbed Wednesday, as investors shed stocks from the U.S. to Europe while scooping up assets seen as safe.

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The yield on the benchmark 10-year U.S. Treasury note settled at 2.335%, compared with 2.381% Tuesday. Yields fall as bond prices rise.

Treasury yields fell overnight, then held on to their declines after Labor Department data showed that consumer prices rose only slightly in October. The report was the latest indication that inflation has continues to run at a tepid pace this year even as other measures of economic activity have picked up.

Bonds had been treading water ahead of Wednesday's economic report, with many investors saying a stronger-than-expected inflation reading could push the Federal Reserve to consider raising interest rates more quickly.

But with the consumer-price index rising just 0.1% in October from a month earlier, and real average hourly earnings declining for a third straight month, there was little to suggest an acceleration in inflation that might pose a threat to bonds, analysts said. Inflation tends to weigh on government bonds by chipping away at the purchasing power of their fixed payments.

"We've had a good amount of positive economic data out there -- GDP, the jobs report, business investment -- but low inflation has really been holding down the longer of the curve," said Renuka Kumar, director, portfolio management at SVB Asset Management.

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A broad retreat from stocks also helped push U.S. bonds higher Wednesday, analysts said.

Major indexes in Asia closed mostly lower, while stocks in Europe notched their seventh consecutive session of declines and the S&P 500 and Dow Jones Industrial Average headed lower, too.

In recent days, investors and analysts have broadly attributed the pullback from stocks to uncertainty over the prospects of a U.S. tax overhaul, renewed weakness in commodity prices and a lack of fresh catalysts for gains following the peak of the third-quarter earnings reporting season.

U.S. Treasurys, which investors see as being safer than stocks because of their fixed returns, often strengthen when investors pull back from riskier assets.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

November 15, 2017 16:06 ET (21:06 GMT)