Curve flattening pauses but still perplexes participants
Treasurys pulled back Thursday, pushing up yields as a global equity bounce dampened appetite for haven assets like U.S. government debt ahead of a flood of economic data.
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What are yields doing?
The yield on the benchmark 10-year Treasury note rose 3.8 basis points to 2.359%, while the 2-year yield rose 2.1 basis points to 1.708%. The yield on the 30-year Treasury bond rose 3.3 basis points to 2.799%.
Yields rise as bond prices fall.
What's driving the market?
Yields were on the rise amid a firmer tone in global equity markets, with U.S. stock-index futures pointing to a bounce (http://www.marketwatch.com/story/us-stocks-on-track-to-bounce-back-after-dows-138-point-drop-2017-11-16) on Wall Street a day after the Dow Jones Industrial Average posted a 138-point drop. Weakness in global equities had spurred demand for haven assets like Treasurys. Stocks have been driven in part by progress, or lack thereof, on U.S. tax-cut legislation.
The yield curve, a line that plots yields across all maturities, steepened modestly Thursday but has been in flattening mode for weeks, with yields at the short end rising in anticipation of Federal Reserve rate increases, while a dearth of inflation has been cited as a potential reason for pressure on longer-dated yields.
The spread between 2- and 10-year yields, a key measure of the curve, hit a decade low of 63 basis points, or 0.63 percentage point, on Wednesday, noted Hussein Sayed, chief market strategist at FXTM, while the spread between 5- and 10-year yields fell below 30 basis points for the first time since 2007.
What are analysts saying?
"The last two days, interest rates have been predictably tied to stocks. Key word = predictable," wrote Jim Vogel, analyst at FTN Financial, in a note. "The process of cutting taxes within a budget is anything but smooth, so there's reassurance in the rhythm of Treasury movements this week."
What's on the economic calendar?
A report on weekly jobless claims is set for 8:30 a.m. Eastern, with economists polled by MarketWatch looking for first-time claims. Also due are data on October import prices and the Philadelphia Fed's business-outlook survey for November.
October data on industrial production are set for release at 9:15 a.m. Eastern, with economists looking for growth of 0.6%. November housing market data is set for 10 a.m. Eastern.
On the speaker circuit, Cleveland Fed President Loretta Mester is set to give a speech in Washington at 9:10 a.m. Eastern, while Dallas Fed President Rob Kaplan takes part in a discussion at a CFA Society of Houston event at 1:10 p.m. Eastern. Fed Gov. Lael Brainard is due to speak at a University of Michigan Law School conference at 3:45 p.m. Eastern, while San Francisco Fed President John Williams addresses a forum on Asia at 4:45 p.m. Eastern.
(END) Dow Jones Newswires
November 16, 2017 08:27 ET (13:27 GMT)