U.S. Government Bonds Strengthen Ahead of Fed Meeting

By Gunjan Banerji Features Dow Jones Newswires

Government bonds strengthened Monday to open a week that contains major central bank meetings around the world.

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The yield on 10-year Treasury notes fell to 2.367% in early trading, according to Tradeweb, from 2.383% on Friday. Yields fall as bond prices rise.

The yield decline began a week that includes a Federal Reserve meeting, at which investors expect the central bank to raise interest rates, along with meetings of the European Central Bank and Bank of England.

Investors also will be watching key data points such as retail sales figures and November consumer-price index data, a key measure of inflation. Inflation is a threat to long-term government bond prices because it chips away at the purchasing power of the debt's fixed payments.

The yield on the 10-year Treasury note slipped to as low as 2.356%, according to Tradeweb, as news broke of an explosion in New York City's Port Authority Bus Terminal near Times Square. A man tried to set off an explosive device he was wearing near one of the state's busiest transit centers. Treasury yields pared some of the declines in later trading.

The 10-year yield's move lower comes after two consecutive weeks of gains. Still, the Treasury market likely will continue to trade in a narrow range as investors watch tax-overhaul plans move through Congress, said Scott Buchta, head of fixed-income strategy at Brean Capital.

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Tax cuts could add to the U.S. government deficits, prompting additional borrowing that could increase the supply of bonds in the market and push yields higher.

"It's wait and see mode right now," Mr. Buchta said.

Government bonds auctions also are scheduled for this week. Auctions can sometimes lead Treasurys to weaken because of added supply in the market. The government is due to sell three-and 10-year notes Monday.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

(END) Dow Jones Newswires

December 11, 2017 12:07 ET (17:07 GMT)