10-Year Treasury Yield Continues To Climb

By Gunjan BanerjiFeaturesDow Jones Newswires

Government bond prices slipped on Wednesday, sending the yield on the benchmark 10-year U.S. Treasury note near its one-year closing high.

The yield on the benchmark 10-year Treasury note rose to 2.588%, according to Tradeweb, from 2.542% on Tuesday, approaching its 52-week high of 2.609% reached March 13. Yields rise as bond prices fall.

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Government bond prices have receded in recent days as improving economic data and the prospect of inflation spurred selling in Treasurys. Higher inflation is a threat to government bonds because it erodes the purchasing power of their fixed payments.

Concerns about foreign demand for U.S. government debt spurred some selling Wednesday. The 10-year Treasury yield rose to as high as 2.597% after a news report that China was considering slowing or stopping its Treasury purchases, analysts said.

The Bank of Japan also recently announced the it would pare purchases of long-term Japanese government bonds, amplifying concerns that central banks may be pulling back from policies that have buoyed bond prices since the financial crisis.

Foreign demand for U.S. government bonds has been robust this year, up $343.1 billion, or 5.7%, in 2017 through October, the latest date for which data was available. China's holdings of Treasurys were up $130.8 billion, or 12% during that period.

A wave of new bond supply this week could also drive selling of Treasurys, said Fred Azar, director of fixed-income strategy at Northern Trust Asset Management. The U.S. Treasury sold 3-year notes Tuesday and is selling bonds maturing in 10 and 30 years Wednesday and Thursday.

Still, he said that recent inflation data appears muted and some investors may be "getting ahead of themselves" when rushing to sell Treasurys.

Price growth for foreign-produced goods slowed at the end of 2017, pulled down by a drop in prices for nonfuel products, the Labor Department said Wednesday. Import prices increased 0.1% in December from the prior month, less than the 0.5% increase that economists surveyed by The Wall Street Journal had expected. The import-price index is used by Federal Reserve policy makers to gauge how quickly prices for products are rising in the U.S.

Recent lackluster inflation data and relatively low rates world-wide could still fuel buying of Treasurys.

"There is still a global search for yield going on," Mr. Azar said.

Daniel Kruger contributed to this article.

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

(END) Dow Jones Newswires

January 10, 2018 11:40 ET (16:40 GMT)