BOND REPORT: Treasury Yields Slightly Higher After Solid Data Affirms Eurozone Recovery

By Sunny Oh Features Dow Jones Newswires

The Pan-German Business Climate Index hit 117.5, a record high since unification

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Treasury prices fell on Wednesday, pushing yields higher, as U.S. bond markets took their cue from European bonds after strong economic data out of Germany gave further evidence that eurozone growth was gathering pace.

Financial markets are set for an early close at 2 p.m. Eastern on Friday (http://www.marketwatch.com/story/black-friday-which-markets-are-closing-early-2017-11-24). Stock and bond markets were closed Thursday for the Thanksgiving Day holiday.

What are Treasury yields doing?

The 10-year benchmark Treasury note yield rose 1.3 basis point to 2.331%. The 2-year note yield was up a basis point to 1.740%. The 30-year bond yield fell 1.5 basis point to 2.755%.

What's driving the market?

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The Pan-German Business Climate Index climbed to 117.5, a record high since the unification of East and West Germany in 1990. This followed a composite measure of the eurozone purchasing manager's index that surpassed economists' expectations.

See: Eurozone business 'booming' as PMIs jump (http://www.marketwatch.com/story/eurozone-business-booming-as-pmis-jump-2017-11-23)

The raft of solid economic data has raised the outlook that the European Central Bank will end its bond purchases next September. ECB President Mario Draghi has insisted, however, that its bond-buying remained open-ended. Whether September marks the effective end-date for the ECB's quantitative easing matters to U.S. investors as the ECB has said rate hikes will only follow once its asset purchases are ended.

European rates tend to move in tandem with U.S. Treasury yields as investors will take advantage of growing differences in cross-country interest rates, keeping any widening yield gaps in check.

What did market participants say?

"Amid solid growth momentum and subdued inflationary pressure, we expect the ECB to remain on a gradual monetary policy normalization path," said strategists at UBS.

What else is on investors' radar?

The minutes of the ECB's October meeting, published on Thursday, showed some officials remained leery of keeping its bond-buying program open-ended as it would give the impression to market participants that its asset purchases might chug along beyond next September.

Read: ECB officials are at odds over end date for QE (http://www.marketwatch.com/story/ecb-officials-are-at-odds-over-end-date-for-qe-2017-11-23)

At the meeting, the ECB said it would taper its monthly bond purchases by half to EUR30 million ($35.69 million) from January to September, but that it retained the option of extending the program further if needed.

How are other assets doing?

The German 10-year yield is up a basis point to 0.360%, while the French 10-year government bond yield was up a basis point to 0.700%. Analysts blamed the lull in trading conditions over the Thanksgiving period for the lack of a stronger selloff in the wake of the eurozone's strong economic data.

(END) Dow Jones Newswires

November 24, 2017 09:25 ET (14:25 GMT)