BOND REPORT: Global Bond Yields Turn Higher As Sovereign Debt Selloff Resumes

Treasury yields resume climb as ECB talks end of QE

U.S. Treasury yields rose on Thursday, joining a global selloff in government paper, as investors took a cautious stance amid fears that central banks were on the verge of halting easy-money policies.

The yield on the benchmark 10-year Treasury rose 3.6 basis points to 2.370%, compared with 2.334% late Wednesday in North American trade. The yield on the 2-year note ticked 0.9 basis point higher to 1.423%, compared with 1.414% in the previous session, while the yield on 30-year bond climbed 3.2 basis points to 2.887%, versus 2.855%.

Bond prices moves inversely to yields and a basis point is equal to one hundredth of a percentage point.

In Europe, bond prices came under selling pressure, pushing yields higher amid a broad selloff in equities, typically perceived as risky assets, and haven government paper. In Germany, benchmark 10-year bonds, known as bunds , rose to their highest level in about 18 months at 0.56%, compared with 0.473% at the start of the week.

Yield moves followed a lackluster auction of French sovereign paper on Thursday, the release of minutes from the European Central Bank, and following comments from Bank of France boss François Villeroy, who said interest rates are set to rise in line a broad recovery seen taking hold in the eurozone.

In a letter to French President Emmanuel Macron, Villeroy said (http://www.marketwatch.com/story/france-risks-sovereign-debt-shock-bank-of-france-2017-07-06)European Central Bank's accommodative monetary policy--including negative lending rates and asset purchases--is "neither eternal nor omnipotent."

The French bank chief's comments were read as echoing remarks from other central banks, including the ECB's Mario Draghi, as suggesting that a time of ultralow rates and asset-purchases that have propped up values in both stocks and bonds may be nearing an end.

Meanwhile, minutes released from the ECB's June policy meeting revealed that Draghi & Co. discussed how to communicate their increasing confidence in the eurozone economy and considered dropping a pledge to accelerate bond-buying program (http://www.marketwatch.com/story/ecb-considered-abandoning-vow-to-accelerate-qe-2017-07-06).

The ECB's minutes follow those from the Federal Reserve, which is in the early stages of normalizing U.S. monetary policy, with an account of its recent policy conventions (http://www.marketwatch.com/story/fed-might-start-balance-sheet-drawdown-in-september-fomc-minutes-hint-2017-07-05), released at 2 p.m. Eastern Time on Wednesday, emphasizing the bank's desire to raise interest rates at least once more in 2017 and begin soon the reduction of its $4.5 trillion asset portfolio.

Although, the Fed appears divided on the precise timing of its balance-sheet reduction (https://www.wsj.com/articles/fed-officials-ready-to-start-portfolio-wind-down-within-months-1499277737), amid stubbornly low inflation and signs that the U.S. recovery, despite healthy labor-market readings, is on an unsteady footing.

A reading of private-sector employment in the U.S. indicated that employers added a seasonally-adjusted 153,000 jobs in June, payroll processor ADP said. That was below the 180,000 jobs that a consensus of economists had forecast. Bonds didn't move significantly after the report.

Looking ahead, investors are awaiting an update on weekly jobless claims scheduled to arrive at 8:30 a.m. Eastern, with a reading of 248,000 expected. Due at the same time is a report on the trade deficit for May, which is expected to show a narrowing to $46.3 billion. A snapshot of activity in the services sector in June will come from Markit at 9:45 a.m. Eastern. Then at 10 a.m. Eastern, the ISM's services index will be released.

Those reports come ahead of the highly anticipated jobs report on Friday, where investors will be closely following for signs of wage growth beyond the headline figures. Economists polled by MarketWatch are expecting 179,000 jobs to be created in June, with the unemployment rate holding steady at 4.3% and average hourly earnings at 0.3%, compared with 0.2% previously.

(END) Dow Jones Newswires

July 06, 2017 08:30 ET (12:30 GMT)