BOND REPORT: Treasury Yields Hold Ground As Investors Await Trump's Nominee For Fed Boss
Treasurys struggled for direction Monday, with yields showing little change as investors waited for President Donald Trump to announce his pick to head the Federal Reserve when Chairwoman Janet Yellen's term ends in February.
Where are Treasury yields?
The 2-year Treasury yield retreated a basis point to 1.568%. The 10-year yield shed a basis point to 2.375%. The 30-year bond yield was barely changed at 2.890%. Bond prices move inversely to yields.
What's driving markets?
Trump on Monday said he was "very, very close" to making a pick. Market participants feel his choice could prove crucial to the direction of the central bank as a more hawkish chairperson could oversee a more faster pace of rate hikes, diminishing demand for government paper.
But if inflation remains tepid (http://www.marketwatch.com/story/us-inflation-surges-again-after-hurricane-boosts-gas-prices-cpi-shows-2017-10-13), long-dated debt could retain their value, flattening the so-called yield curve, a graph linking the yield and maturities of a bond.
See: Here's how bond traders are preparing for Trump's Fed chief pick (http://www.marketwatch.com/story/heres-how-bond-traders-are-preparing-for-trumps-fed-chief-pick-2017-10-17)
The Spanish central government said it wanted to declare Article 155 and take control of the Catalan regional government to put a stop to its secession movement. Concerns that a flare-up in tensions could threaten the territorial integrity of the European Union and derail the progress of one of the fastest recovering economies in the eurozone have drawn somef buyers back into the U.S. bond market.
Read: Spain moves to sack Catalonia's government, take control of the region (http://www.marketwatch.com/story/spanish-leader-plans-to-sack-catalonias-leaders-hold-early-elections-2017-10-21)
What are market participants saying?
"While we're cognizant of the near and midterm implications of a hawkish Fed chair, we're more confident that aggressive hikes will be met with a flatter curve and that the responsibility of guiding the US economy through a global deterioration in demographics ("lowflation", secular stagnation, the end of the business cycle, etc.) will result in an eventually softer tone from whoever ends up occupying the Fed chair," noted Aaron Kohli, fixed-income strategist at BMO Capital Markets.
What else is on investors' radar?
What are other assets doing?
Tensions in Spain simmered, stoking a bid in Spanish government paper. The 10-year Spanish government bond yield fell 4 basis points to 1.620%. The Japanese Nikkei, its benchmark stock index, notched a record streak of gains ()after Abe's comprehensive victory.
(END) Dow Jones Newswires
October 23, 2017 16:51 ET (20:51 GMT)