BOND REPORT: Treasurys Pare Gains As Catalan Tensions Unwind
Catalan President Carles Puigdemont delays call for secession from Spain
Treasury prices pared their earlier gains, nonetheless pushing yields lower, on Tuesday as the Catalan president pushed for further talks with Madrid in an effort to defuse tensions.
What are government bonds doing?
The 10-year Treasury note yield slipped to 2.343% from 2.370% late Friday in New York. The two-year Treasury note yield was down to 1.508% from 1.511%, while the 30-year Treasury bond yield fell to 2.880% from 2.907%, snapping a five-day streak of yield gains. Bond prices move in the opposite direction of yields.
Treasurys weren't traded on Monday in observance of Columbus Day (http://www.marketwatch.com/story/columbus-day-which-markets-are-closed-2017-10-09).
What is driving markets?
The bid in Treasurys appeared to unwind slightly after Catalan President Carles Puigdemont said he would suspend his call for independence to continue negotiations with the central government in Madrid. Subsiding geopolitical concerns could curb flows into government paper and assets perceived as safe.
See: Catalan leader delays call for independence from Spain (http://www.marketwatch.com/story/catalan-leader-shoulders-referendum-mandate-but-delays-independence-call-2017-10-10)
Investors, meanwhile, will await the minutes from the policy-setting Federal Open Market Committee's September meeting, where further clues about monetary policy might be gleaned. At the meeting, the majority of its members were in favor of an additional rate increase this year (http://www.marketwatch.com/story/text-of-september-fomc-statement-2017-09-20), according to a plot of policy maker's projections, known as the dot plot. Traders are pricing in an 87% chance of a quarter-percentage-point rate increase by the Federal Reserve when it convenes in December, data from CME Group show (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
What do market participants say?
"I really think that people are coming to their senses a bit, and they're saying we're not going to see higher rates after all. Especially, if we get some geopolitical risk like the Catalan independence and the North Korean situation," said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities. He suggested the recent selloff seen last Friday was overstretched, when the 10-year Treasury yield threatened to break past key psychological level of 2.40%.
Which central bankers are on the docket?
What data is on investors' radar?
How are other assets doing?
The dollar tipped lower after the euro strengthened from (http://www.marketwatch.com/story/dollar-loses-ground-as-euro-climbs-on-tapering-hopes-2017-10-10) hawkish comments by Lautenschalger. A currency tends to strengthen when expectations for tighter monetary policy grow. Geopolitical tensions between U.S. and North Korea continued to stir up appetite for haven assets, with gold futures (http://www.marketwatch.com/story/gold-rises-on-track-for-longest-string-of-gains-in-5-weeks-2017-10-10) notching the longest win streak in five weeks and the Japanese yen strengthening.
(END) Dow Jones Newswires
October 10, 2017 16:55 ET (20:55 GMT)