ECB President Mario Draghi says bulk of key policy decisions would come in October's meeting
Treasury prices rallied, pushing yields to a fresh nadir, on Thursday after investors interpreted European Central Bank President Mario Draghi's as relatively dovish in his news conference, even as he punted on the decision to taper its asset-purchasing program forward to October.
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The benchmark 10-year Treasury note was off 5.9 basis points at 2.049%, compared with 2.108% late Wednesday in New York, marking its lowest level since early November.
The two-year Treasury note was off 5.6 basis points at 1.250%, compared with 1.306%. Meanwhile, the 30-year bond yield retreated 5.6 basis points at 2.668%, versus 2.724 late Wednesday.
The ECB, as expected, kept in place its EUR60 billion asset-buying program and left its main refinancing operations at 0%, while the rate on deposits left overnight was maintained at minus 0.4% and its marginal lending facility was left at 0.25%. U.S. bond investors eye the actions of the European Central Bank, as negative interest rates in the economic bloc have encouraged a steady flow of money from money managers rotating into higher-yielding U.S. paper.
European Central Bank President Mario Draghi said the monetary-policy setting committee would use next month's meeting at Oct. 26 to decide whether to maintain the current pace of bond-buying after 2017. He also fielded questions on the strength of the euro, but refused to comment on its summer surge. Nonetheless, the currency tipped over $1.20 despite what Draghi described as exchange-rate volatility.
"All in all, it was a pretty dovish press conference," said David Owen, chief European financial economist for Jefferies. "He wasn't upbeat on the eurozone as we expected him to be."
In past speeches, Draghi has showed an optimism over the broadening economic recovery in the region, but a conspicuous lack of such remarks shows he has been under pressure to strike a more measured tone to avoid roiling markets. Comments Draghi made in Sintra, Portugal in late June (http://www.marketwatch.com/story/draghi-hints-ecb-may-start-winding-down-qe-2017-06-27)were read as hawkish by investors who sent the euro surging against the U.S. dollar. Since then, the currency has steadily climbed. A stronger euro can undercut economic improvement in Europe's trade bloc by making goods and services offered by European multinationals more expensive to its main trade partners.
Yet, the European Union's statistics agency showed eurozone growth has picked up earlier than previously understood, raising its second-quarter figures to an annualized 2.6% rate.
Check out: ECB live blog: Is strong euro making Mario Draghi miserable? (http://blogs.marketwatch.com/thetell/2017/09/07/ecb-live-blog-is-strong-euro-making-mario-draghi-miserable/?mod=MW_story_latest_news)
Traders still expect the ECB to commence tapering the crisis-era, European stimulus program in 2018.
The German 10-year government bond plunged 4.6 basis points to 0.298%, compared with 0.344% in the previous session.
Investors also received their first piece of economic data to show an influence from Hurricane Harvey. Jobless claims for the week ending Sep. 2 surged to 298,000 from 236,000 (http://www.marketwatch.com/story/storm-surge-hurricane-harvey-boosts-jobless-claims-by-62000-to-298000-2017-09-07), its highest level since early 2015, as workers found it difficult to get to work, making them eligible for unemployment benefits. But analysts said the bump in claims would be transient.
"Such extreme weather effects are invariably temporary," wrote Jim O' Sullivan, chief economist for High Frequency Economics.
Besides data, investors will look ahead to speeches from several members of the Fed's rate-setting group a day after Stanley Fischer resigned from the board of governors (http://www.marketwatch.com/story/vice-chairman-stanley-fischer-announces-resignation-from-the-fed-2017-09-06), bringing up the total number of vacancies on the influential panel to four.
Cleveland Fed President Loretta Mester, nonvoter, will give a talk on the economic outlook at 12:15 p.m. Eastern. Both New York Fed President William Dudley, voter, and Atlanta Fed President Raphael Bostic, a voter in 2018, are slated to speak at 7 p.m. Soon after, Kansas City Fed President Esther George, nonvoter, will make an appearance at 8:15 p.m. Eastern.
(END) Dow Jones Newswires
September 07, 2017 10:49 ET (14:49 GMT)