BOND REPORT: Treasury Yields Lower Ahead Of Empire State Survey

By Sunny OhFeaturesDow Jones Newswires

Treasury yields were slightly lower ahead of the Empire State manufacturing survey in what looks to be a muted day for trading.

Bond markets were closed on Monday as it was a federal holiday.

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What are Treasurys doing?

The 10-year Treasury note yield fell to 2.536%, from 2.551% late Friday, according to WSJ market data. The 2-year note yield was mostly flat at 1.998%, while the 30-year bond yield fell to 2.839%, versus 2.855%.

Bond prices move in the opposite direction of yields.

What's driving markets?

Expectations for German Chancellor Angela Merkel to come up a grand coalition have taken a hit after Kevin Kuehnert of the German Social Democrats advocated the party to back away from the deal. The resurgence of political uncertainty drove investors into German government paper and Treasurys. Both assets tend to trade alongside each other as they are two of the few sovereign debt that sport a triple A rating.

The Empire State manufacturing survey is set to come out at 8:30 a.m. Eastern. The data release offers an economic snapshot of the state of New York.

What did market participants say?

"In the week ahead, the market will grapple with 2-year yields over 2% and 10-year yields that could well test 2.60% again. Data are light and the market is likely to focus on some additional Fedspeak, especially from Quarles at the end of the week as well as from Mester," said Ian Lyngen and Aaron Kohli, fixed-income strategists for BMO Capital Markets, in a note.

What else is on investors' radar?

The federal government may run out of cash on Friday if Congress cannot agree on a short-term spending bill. The chance of the Democrats and Republicans coming up with a viable deal appeared to slip after a bipartisan immigration deal was rejected by President Donald Trump last week. A government shutdown would diminish the haven qualities of U.S. debt and could, thus, increase borrowing costs.

What other assets are on the move?

The German 10-year government bond yield fell 3 basis points to 0.560%.

(END) Dow Jones Newswires

January 16, 2018 08:29 ET (13:29 GMT)