BOND REPORT: Treasury Yields Trade Slightly Higher As Focus Turns To Bond-issuance Rush, Fed Meeting

By Sunny Oh Features Dow Jones Newswires

Treasury yields inched higher on Tuesday but remained largely rangebound as investors shifted attention toward a wave in corporate bond and municipal-bond issuance, with issuers looking to sell debt ahead of 2017. Meanwhile, the Federal Reserve was slated to kick off its closely watched two-day policy meeting on Tuesday, which will influence investing.

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What are Treasurys doings?

The 2-year note yield ticked higher to 1.831%, from 1.823% late Monday. The 10-year note yield rose to 2.400%, from 2.387%. The 30-year bond yield was at 2.784%, versus 2.772%.

Bond prices move inversely to yields.

What's driving markets?

Investors are seeing a lull in trading as busy bond-buyers handle a strong rush of supply from corporate and municipal bonds as issuers look to get ahead of the tax plan's passage and remain grandfathered under the old tax rules. That has temporarily shifted focus away from the market for government paper.

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Wholesale prices rose 0.4% in November, pulling it up to 3.1% over the past 12 months (http://www.marketwatch.com/story/us-wholesale-inflation-hits-nearly-6-year-high-adds-to-case-for-fed-rate-hike-2017-12-12). Higher producer prices can lead to building "pipeline" of inflationary pressures and is one reason forecasters are hopeful that the recent weakness in inflation will abate. That could discourage investors from snapping up long-dated Treasurys, whose value are worn down by higher prices.

The Federal Open Market Committee, the central bank's rate-setting group, convene Tuesday. They are expected to deliver a third interest-rate hike for the year. That fact and a bevy of other potentially market-moving news, including consumer-price index data, has captured investor attention.

See: What bond and currency traders are looking for from Yellen's Fed decision (http://www.marketwatch.com/story/what-bond-and-currency-traders-are-looking-for-from-yellens-fed-decision-2017-12-11)

What did market participants say?

"A primary reason for the tight core outlook for [10-year Treasurys] is the strong acceptance for the remaining supply in corporates--already thinning--and near record-level municipal bond sales that could be restricted if/when the tax bill passes. There is no particular reason to rush into Treasuries as they certainly will provide ample supply in 2018-2019," wrote Jim Vogel, an interest-rate strategist for FTN Financial.

Read: Municipal bonds see deluge of supply as Republican tax plan fears build (http://www.marketwatch.com/story/municipal-bonds-see-deluge-of-supply-as-republican-tax-plan-fears-build-2017-12-04)

(http://www.marketwatch.com/story/municipal-bonds-see-deluge-of-supply-as-republican-tax-plan-fears-build-2017-12-04)Also check out: Companies rush to sell bonds to get ahead of tax plan, sparking 'carnage' (http://www.marketwatch.com/story/companies-rush-to-sell-bonds-to-get-ahead-of-tax-plan-sparking-carnage-2017-11-10)

What else are on investors' radar?

The NFIB small business optimism index climbed to 107.5 in November (http://www.marketwatch.com/story/small-business-sentiment-in-november-powers-to-the-second-highest-reading-on-record-2017-12-12), the second highest reading on record. Budding confidence that Congress will pass a tax cut has lifted small-business owners, who are classified as pass-through firms, one of the chief beneficiaries of the GOP tax plan (http://www.marketwatch.com/story/how-the-trumps-tax-bill-will-help-businesses-and-lobbyists-2017-11-08).

How are other assets doing?

The German 10-year government bond yield was up 0.7 basis point to 0.304%. The French 10-year bond yield rose 1.4 basis point to 0.636%.

(END) Dow Jones Newswires

December 12, 2017 10:55 ET (15:55 GMT)