BOND REPORT: Short-dated Treasury Yields Rise As Traders Await Data Deluge, Fed Meeting
Short-dated Treasury yields added to a rise on Friday, putting 2-year note yields on track for a fifth straight increase amid rising expectations for an additional Federal Reserve rate rise before the end of 2017.
Yields and bond prices move in opposite directions.
Early moves on Friday come ahead of a deluge of economic reports, following inflation data on Thursday that came in hotter than expected (http://www.marketwatch.com/story/higher-rents-gas-boost-inflation-in-august-cpi-shows-2017-09-14), bolstering the view that the U.S. central bank may signal that its desire to normalize monetary policy remains intact when it meets next week on Tuesday and Wednesday.
The yield on 2-year Treasury note was at 1.384%, compared with 1.367% late Thursday in New York, while the benchmark 10-year Treasury note yield was little changed at 2.202%, compared with 2.199% in previous session. The yield for the 30-year Treasury bond, known as the long bond, pulled back somewhat at 2.775%, versus 2.782% on Thursday.
Looking ahead, reports include August retail sales and this month's Empire State Manufacturing Survey, which are set for release at 8:30 a.m. Eastern Time. Economists polled by MarketWatch predict that retail sales showed no growth in August, though they anticipate a rise of 0.4% when auto sales are excluded.
Later, a report on August industrial production is slated to hit at 9:15 a.m. Eastern, with economists forecasting no growth. At 10 a.m. Eastern, investors are due to get a July figure for business inventories and a September reading on consumer sentiment, slated to come in at 94.5.
On Thursday, the consumer-price index rose 0.4% in August, compared with forecasts for a 0.3% rise. The data helped to push up the yearly inflation rate higher to 1.9%, close to the Fed's long-term 2% target.
Inflation has been a key focus for bond investors, because stubbornly low inflation has threatened to stay the Fed's hand at lifting rates.
Rising inflation can chip away a bond's fixed value, which in turn can spur selling in government paper, pushing yields higher.
Of late expectations for a rate increase have shifted to more probable than less. The market is currently pricing in a better than 50% chance of a rate hike before the end of 2017, compared with around 30% last week, according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
Much of that increase has been linked to a sense of fading risks. Friday's rise comes even as North Korea fired a missile over Japan (http://www.marketwatch.com/story/un-security-council-to-hold-emergency-meeting-after-latest-north-korean-missile-test-2017-09-14) for the second time in less than a month, defying rising international efforts to force it to abandon course.
In Europe, bond yields were ticking somewhat higher after the Bank of England on Thursday left interest rates unchanged but signaled that it intends on raising rates in coming months. U.K. 10-year bond yield , or gilt, surged to 1.303%, compared with 0.99%, according to FactSet data. The British pound also jumped against the dollar, most recently at $1.35, marking its highest level since the U.K. voted to exit from the European Union in June 201 (http://www.marketwatch.com/story/ballistic-pound-shoots-up-to-highest-level-since-brexit-vote-2017-09-15)6.
Meanwhile, the yield on the German 10-year bond, known as the bund, was at 0.432%, versus 0.312% on Sept. 11.
In exchange-traded products, the iShares 20+ Year Treasury Bond ETF(TLT) was down 0.1%, on track for a weekly decline of 1.7%.
(END) Dow Jones Newswires
September 15, 2017 08:08 ET (12:08 GMT)