Yellen strikes dovish tone; November Fed minutes awaited
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Treasury yields fell Wednesday after lackluster data on durable goods orders, though underlying details remained solid.
Financial markets will be closed Thursday for the Thanksgiving Day holiday, with stock and bond markets set for an early close on Friday.
What are yields doing?
The yield on the benchmark 10-year Treasury note slipped 3 basis points to 2.336%, while the yield on the 2-year note fell 2.4 basis point to 1.747%. The yield on the 30-year Treasury bond edged lower to 2.752%, versus 2.762% on late Tuesday.
Yields and debt prices move in opposite directions.
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What's driving markets?
U.S. durable goods orders fell 1.2% in October (http://www.marketwatch.com/story/us-durable-goods-orders-fall-12-in-october-in-whats-likely-a-temporary-setback-2017-11-22), its second drop this year, versus forecasts for a rise of 0.5%. While the headline number was a surprise, analysts said underlying details looked much better.
They highlighted that the gauge can be notoriously volatile as large aircraft orders can influence the measure. Orders minus transportation rose 0.4% in October. Plus, the overall trend has been much better, with core orders climbing at an annual 14.5% pace in the past three months.
Outgoing Federal Reserve Chairwoman Janet Yellen sounded a dovish note (http://www.marketwatch.com/story/yellen-says-inflation-below-2-goal-poses-one-of-the-biggest-challenges-to-fed-2017-11-21) in remarks Tuesday night, expressing concerns about stubbornly below-target inflation, a phenomenon she described as one of the "biggest challenges" faced by policy makers. If inflation remains subdued, the impetus to raise and continue normalizing interest rates may not be apparent, she said.
Yellen is set to leave the Fed in February when her term as chairwoman ends. President Donald Trump has nominated Fed Gov. Jerome Powell to take her place at the helm of the central bank.
What are investors watching?
U.S. initial weekly jobless claims fell 13,000 to 239,000 for the week ending Nov. 18 (http://www.marketwatch.com/story/us-jobless-claims-sink-13000-to-239000-but-puerto-rico-still-a-sore-spot-2017-11-22). Economists polled by MarketWatch expected a 240,000 reading.
The University of Michigan said its consumer sentiment index fell to a reading of 98.5 (http://www.marketwatch.com/story/consumer-sentiment-in-november-was-second-strongest-in-13-years-2017-11-22) from October's 100.7, still the second-best reading in 13 years. Economists polled by MarketWatch had forecast a reading of 98.
See:MarketWatch Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
Minutes of the Fed's November policy meeting are set for release at 2 p.m. Eastern.
Read: Fed minutes likely to greenlight rate hike in December, but inflation debate still unsettled (http://www.marketwatch.com/story/fed-minutes-likely-to-greenlight-rate-hike-in-december-but-inflation-debate-still-unsettled-2017-11-21)
What are analysts saying?
"Thus, capital spending levels are still rather lackluster but we'll take the recent improvement and hopefully it will continue if the tax bill passes which will include immediate expensing. Generally speaking, we are certainly seeing some hurricane related bounce back in the economy, particularly on the inventory side so a better gauge of the underlying trend may not come until next year," said Peter Boockvar, chief market analyst for The Lindsey Group, in reaction to the durable goods data.
Treasurys may be poised to tread water ahead of Thursday's holiday and Friday's shortened session, analysts said.
The November Fed meeting "saw no policy change and with the decision already made on starting bond sales, the discussion might not have as much interest for the market as usual," said Steven Barrow, currency and fixed-income strategist at Standard Bank, noting a December rate raise is priced in at a 97% probability based on fed funds futures and slightly higher based on overnight interest swap rates.
(END) Dow Jones Newswires
November 22, 2017 10:37 ET (15:37 GMT)