BOND REPORT: Treasury Yields Rise Modestly As Comey Delivers Senate Testimony
A trio of potentially market-moving events on the day, including Comey testimony, an ECB decision, and U.K. elections, described as 'Super Thursday'
Treasury prices slid, and yields gained, in anticipation of a triple-decker run of events including former Federal Bureau of Investigation director's testimony in front of a Senate panel, and a U.K. general election.
The yield on the 10-year note added 3.4 basis points to 2.202%. 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 budged up 0.4 basis point to 1.322%, while the 30-year bond, or the long bond, added 0.5 basis point to 2.854%.
The ex-FBI director, James Comey, will give testimony to the Senate Intelligence Committee. His live testimony comes after his prepared remarks late Wednesday (http://www.marketwatch.com/story/full-text-of-comeys-prepared-senate-testimony-2017-06-07) saw a muted response on Wall Street, with some interpreting the release as not damning to President Donald Trump.
The Senate is investigating Comey's firing as the agency was investigating Trump and his administration's ties to Russian officials during his campaign for the White House. Comey's statement suggest that Trump wanted the FBI to clear his name and drop investigations into former national security adviser Michael Flynn. Trump has denied those allegations.
"The market consensus on Comey appears to be moving towards the view that he is unlikely to say anything else in the testimony Thursday beyond what was contained in his statement. Ostensibly, that should be risk-positive," said Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets, in a note.
Yields rose in overnight sessions as traders took the opportunity to sell at relatively rich levels after having fallen to its lowest levels since Nov. 10 on last Friday. They said the proximity of the Federal Reserve's policy meeting on June 13 and June 14, where a rate increase is expected.
"All of today's events are well recognized by the markets and therefore selling should occur today or before the week due to front-loaded Treasury auction supply next week," said Tom Di Galoma, managing director of Treasurys trading, in a note.
But Treasury yields pared back their earlier gains after the European Central Bank policy meeting, part of the bevy of potentially market-moving events that some on Wall Street has dubbed "Super Thursday."
Senior European policy makers left interest rates unchanged and took out a reference that rates could head even lower, but said they would continue to hover at current levels for an "extended period of time." But investors hoping for ECB President Mario Draghi to add a more hawkish tilt were frustrated by the extent of his remarks.
"Yields pulled back based on Mario Draghi's comments as he continues to be very dovish as to when the ECB might be paring back their bond buying program, investors were a little disappointed on that aspect," said Charles Ripley, an investment strategist for Allianz Investment Management.
See: Mario Draghi live blog: ECB drops reference to potential for further rate cut (http://blogs.marketwatch.com/thetell/2017/06/08/mario-draghi-live-blog-ecb-drops-reference-to-potential-for-further-rate-cut/)
The U.K. also is holding its general election (http://www.marketwatch.com/story/5-things-to-know-about-the-uk-general-election-next-week-2017-06-01), but the final results will be known by Friday morning. Opinion polls now show the gap between the Prime Minister Theresa May's Conservatives and the opposition Labor Party has narrowed considerably. But analysts expect May to emerge with a slim majority in parliament.
Also see: U.K. stocks sag as British voters head to the polls (http://www.marketwatch.com/story/uk-stocks-wobble-as-british-voters-head-to-the-polls-2017-06-08)
On the data front, initial jobless claims fell by 10,000 from 245,000 (http://www.marketwatch.com/story/us-jobless-claims-drop-10000-to-245000-2017-06-08)in the week ending June 3. The four-week average of new filings for unemployment benefits, however, rose by 2,250 to 242,000.
(END) Dow Jones Newswires
June 08, 2017 10:35 ET (14:35 GMT)