Bond traders will be eyeing speeches from James Bullard, Loretta Mester and Jerome Powell over the course of the day
Treasury yields edged up ahead of a packed schedule of Federal Reserve speakers that could give market participants direction on how aggressively the central bank plans to tighten monetary policy even as recent consumer price data has shown weakness.
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The yield for the benchmark 10-year note rose 0.9 basis point to 2.154%. One basis point is one hundredth of a percentage point; Bond prices move inversely to yields.
The 2-year note was relatively unchanged at 1.345%, while the 30-year bond, or the long bond, gained 1.8 basis point to 2.724%.
Yields have largely remained unchanged on Friday and for the week as bond investors are looking for signs of disagreement among the Fed over last week's policy statement, which hinted that the central bank was still on for one more rate hike and a balance sheet reduction by the end of the year. Traders and analysts alike feel the last three months of deteriorating inflation data should warrant further caution from the Fed at the risk of running ahead of the curve.
It's partly why the yield for the 10-year note has budged up a single basis point since June's quarter-point rate hike. Long-dated yields should usually move higher in response to an interest rate increase.
"There is a substantial risk that the Fed's opportunistic tightening campaign is a hawkish mistake, noted Joachim Fels, global economic advisor for Pacific Investment Management. "We are only one major adverse shock away from a serious deflationary scare."
St. Louis Fed President James Bullard, a non-voting member of the central bank's interest-rate setting group, will give a talk on the U.S. economy and monetary policy to the Illinois Bankers Association at 11:15 a.m. Eastern. Cleveland Fed President Loretta Mester, also a non-voter, will appear for a luncheon speech at 12:40 p.m. Fed Gov. Jerome Powell will give remarks at the Chicago Fed symposium on regulation at 2:15 p.m. but is not expected to talk about monetary policy.
There have been some signs that the Fed's push to tighten monetary conditions lacks unanimous support among the Federal Open Market Committee. Earlier this week, Chicago Fed President Charles Evans, a voter, backed off the need for the Fed to hike again this year, though he hedged his remarks by saying the economy was performing "quite well."
The Bank of England has faced increasing discord on whether it should tighten monetary policy to cool the economy as inflation rises and the pound weakens. Kristin Forbes, a retiring member of the U.K.'s monetary policy-setting group, said her fellow committee members were "more hesitant to 'take away the punch bowl' and make the difficult decisions on inflation." U.K. inflation currently is approaching close to 3%.
The policy-sensitive 2-year U.K government bond touched an 8-month high of 0.257% in early morning trade Friday. Elsewhere, the 10-year German bond, or the bund was steady at 0.255%.
On the data front, reports were mixed. A "flash" reading of manufacturing purchasing managers index fell to a nine-month low in June (http://www.marketwatch.com/story/initial-manufacturing-pmi-falls-to-9-month-low-in-june-2017-06-23). The IHS Markit manufacturing index fell to a reading of 52.1 in June from 52.7 in May, a reading that still shows improving conditions as it's above the 50 mark. In a separate report, new-home sales were running at a seasonally adjusted annual rate of 610,000 in May, as past months' readings were revised up.
As for the broader economy, existing home sales beat expectations for the month, one bright spot in economic data as recent numbers have underperformed consensus expectations. The economy created 138,000 jobs in May compared to the expected 185,000, according to nonfarm payrolls data.
(END) Dow Jones Newswires
June 23, 2017 11:08 ET (15:08 GMT)