U.S. Government Bonds Slip as Senate Votes to Reopen Government

FeaturesDow Jones Newswires

U.S. government bonds posted small gains as investors took a cautious approach to trading at the start of the government's first shutdown since 2013.

The benchmark 10-year Treasury note yield slipped to 2.633%, according to Tradeweb, from 2.639% Friday. Bond prices rise as yields fall.

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The effects of a government shutdown that began Saturday began kicking in more forcefully Monday morning across the federal bureaucracy, with agencies implementing contingency plans to scale back operations and send workers home. While lawmakers may vote on a number of proposals to end the impasse, it is unclear whether there are enough votes at hand to end the shutdown.

The shutdown doesn't curtail the government's ability to raise money, and the Treasury is scheduled to sell $103 billion of notes this week. The government is selling two-, five- and seven-year notes, as well as floating-rate notes.

The market's focus "is mostly about Washington," said Aaron Kohli, an interest-rate strategist at BMO Capital Markets.

While the initial phase of the shutdown has had little consequence for financial markets, the longer the government remains shut, the greater the chance of disruption, Mr. Kohli said.

The Federal Reserve is widely expected to raise rates in March, for example, and a reduction in the quality of economic data, or its absence, would make it more difficult for policy makers to act.

"It's hard to make the case that a Fed that hikes in the absence of data is really data dependent," Mr. Kohli said.

A prolonged budget fight could also foreshadow difficulties in increasing the country's statutory debt limit, which analysts expect will expire in early March.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

U.S. government bonds weakened Monday after Democrats and Republicans in the Senate reached an agreement to end the government shutdown.

The benchmark 10-year Treasury note yield rose to 2.654%, according to Tradeweb, from 2.639% Friday. Yields rise as bond prices fall.

Yields rose after the Senate to advance a bill that would reopen the federal government after the brief shutdown and fund operations for three weeks.

Once the Senate passes a final bill with a simple majority, which is expected later Monday, the House is expected to follow up quickly and pass the same legislation. President Donald Trump would then sign the deal into law, ending a three-day shutdown that started Saturday.

Many investors were skeptical about the impact of the shutdown on financial markets, and they said they expected little to change once the measure receives final approval.

"They're just going to kick the can a little bit further down the road," said Luis Maizel, a bond manager at LM Capital Group. "Nobody expected this to last."

One of the biggest impacts for investors had been the prospect of a loss of economic data from government agencies, which would have made it more difficult for them to assess conditions, some analysts said.

The government is scheduled to sell $103 billion of notes this week, with offerings of two-, five- and seven-year notes, as well as floating-rate notes. The sales, which are deemed essential to operations, would have been unaffected by the shutdown.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

January 22, 2018 14:32 ET (19:32 GMT)

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