BOND REPORT: Treasury Yields Rise As Investors Steer Through Geopolitical Concerns
10-year Treasury yields edge up from November lows hit this week
Treasury yields rose Friday after bond investors cleared a triple-decker of potentially market-moving events, including a U.K. general election, former Federal Bureau of Investigation Director James Comey's testimony in front of a Senate panel and a European Central Bank policy meeting, helping to unwind previous buying of U.S. government paper before a day that had been dubbed "Super Thursday."
The yield on the 10-year Treasury note added 2.5 basis points to 2.215%. Earlier this week, it closed at its lowest level since Nov. 10. Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.
The yield on the 2-year note added 2 basis points to 1.343%, while the yield on the 30-year bond, or the long bond, rose 2 basis points to 2.871%.
U.S. bond yields climbed in morning trading after investors parked in Treasurys seeking shelter ahead of Thursday's events sold off their positions.
"Most of the increase came about from the passing of the Comey testimony without fatal or near fatal outcomes" for the Trump administration, said Richard Gilhooly, head of rates strategy at CIBC Capital Markets. "The premium is still going to remain with the impeachment risk. It was marked upwards coming into this week, the risk being marked down subsequently after [his testimony]."
See: Here are the key takeaways from Comey's testimony (http://www.marketwatch.com/story/here-are-the-key-takeaways-from-comeys-testimony-2017-06-08)
Attention also turned to next week's $84 billion of Treasury auctions and a Fed policy meeting, which is widely expected to deliver a rate increase.
Benchmark U.K. bond yields fell Friday as investors sought the relative certainty of government bonds in the wake of the election upset that denied the ruling Conservative party the stronger majority it sought to strengthen its position in coming negotiations with the European Union to exit from the trading bloc. But the flight-to-quality sentiment didn't spread to U.S. bonds, which already had hit a seven-month low this week.
Theresa May's Tories were at one time projected to secure 400-plus seats but instead came up short of the 326 seats needed for a majority in Parliament. May was reportedly working to secure a coalition with Northern Ireland's DUP (http://www.marketwatch.com/story/uks-may-turns-to-northern-irish-party-dup-to-form-government-after-election-rebuke-2017-06-09) to earn enough votes to govern.
"The U.K election is being seen very optimistically as a soft Brexit outcome," said Gilhooly.
The election result spurred buying of British bonds after investors saw May's weakened mandate leading her to tone down her euroskeptic stance as the U.K. looks to exit from the economic bloc.
See: After U.K. election shocker, Brexit itself looks 'surely in trouble now' (http://www.marketwatch.com/story/after-uk-election-shocker-brexit-itself-looks-surely-in-trouble-now-2017-06-09)
British 10-year gilt yields dipped 3 basis to 1.004%, having earlier fallen a touch below 1% as election results pointed to May's shortfall. But sterling hit a seven-week low (http://www.marketwatch.com/story/pound-tumbles-to-7-week-low-as-uk-exit-poll-points-to-hung-parliament-2017-06-08) and was down some 1.7% against the dollar in the morning, but pared its losses back later in the day.
(END) Dow Jones Newswires
June 09, 2017 14:11 ET (18:11 GMT)