2-year yield pushes past 1.60%, the highest level since 2008
Treasurys continued to weaken Wednesday, pushing the yield on the benchmark 10-year note to its highest level since March, as investors await President Donald Trump's pick to head the Federal Reserve once Chairwoman Janet Yellen's term ends in February.
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What are yields doing?
The yield on the 10-year Treasury note rose 4 basis points to 2.445%, after earlier trading at a session high aof 2.474%, its highest mark since March 21, according to FactSet. It broke through 2.40%, a key level, during the previous session.
The 2-year Treasury yield rose 4 basis point to 1.615%, while the 30-year Treasury bond yield was up 3 basis points at 2.958%. Yields rise as Treasury prices decline.
What's driving the market?
Trump on Monday said he was very close to announcing his decision on Fed leadership. In a meeting Tuesday with Republican senators on Capitol Hill, Trump asked for a show of hands (http://www.marketwatch.com/story/trump-asked-senate-republicans-who-should-be-next-fed-chair-and-john-taylor-reportedly-was-the-winner-2017-10-24) on who they though should be the next Fed chair, with Stanford economist John Taylor, who is seen as likely to take a more hawkish approach, the apparent winner.
New economic data in the morning hinted that growth could heat up toward the end of the year, and that Friday's third-quarter GDP number could be higher than expected. Solid business investment and a faster pace of home sales paint a portrait of an economy picking up. But unless growth pushes inflation toward the Fed's 2% target, its difficult to see how the U.S. central bank, an institution whose main mandate is price stability, can raise interest rates much higher.
Read:Can a Powell-Taylor ticket at the top of the Fed really work? (http://www.marketwatch.com/story/can-a-powell-taylor-ticket-at-top-of-the-fed-really-work-2017-10-23)
(http://www.marketwatch.com/story/can-a-powell-taylor-ticket-at-top-of-the-fed-really-work-2017-10-23)Investors are also awaiting a Thursday meeting of the European Central Bank that's expected to see President Mario Draghi unveil a plan to begin tapering the bank's monthly asset buying program in January.
See:Mario Draghi needs to avoid a 'taper tantrum' when the ECB meets (http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)
(http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)Also read:Why Italy faces the worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)
What are market participants saying?
"Major bond markets face a possible triple whammy over the next week or so. President Trump could reveal a more hawkish Fed lineup, the ECB could taper bond purchases back significantly and the Bank of England could lift the base rate for the first time in a decade," said Steven Barrow, currency and fixed-income strategist at Standard Bank. "But while bonds may wobble on these threats we don't expect yields to soar at this stage."
Barrow argued that scope for a bond selloff, and a rise in yields, is limited by inflation's continued failure to show up.
What's on the economic calendar?
Durable goods orders rose 2.2% in September (http://www.marketwatch.com/story/business-investment-surges-again-in-september-durable-goods-report-shows-2017-10-25), well above the MarketWatch forecast of a 0.7% gain.
New home sales accelerated in September to an annualized pace of 667,000, the fastest pace in a decade (http://www.marketwatch.com/story/new-home-sales-roar-to-a-10-year-high-in-september-2017-10-25). Economists were expecting new transactions to come in at a 555,000 annual rate.
See:MarketWatch Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
(http://www.marketwatch.com/economy-politics/calendars/economic)Economic Preview: Here's the kind of spending that leads to bigger paychecks and a roaring economy (http://www.marketwatch.com/story/heres-the-kind-of-spending-that-leads-to-bigger-paychecks-and-a-roaring-economy-2017-10-21)
(END) Dow Jones Newswires
October 25, 2017 11:20 ET (15:20 GMT)