Treasurys Extend Rally

FeaturesDow Jones Newswires

U.S. government bonds extended recent gains Friday as muted inflation expectations continued to support government debt on both sides of the Atlantic.

In recent trading, the yield on the benchmark 10-year Treasury note was 2.243%, according to Tradeweb, compared with 2.266% Thursday.

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Yields, which fall when bond prices rise, have declined steadily over the past two weeks as soft inflation data eased concerns about major central banks potentially tightening their monetary policies.

A European Central Bank survey released Friday showed professional forecasters see annual inflation in the eurozone running at 1.5% this year, 1.4% next year and 1.6% in 2019, all below the ECB's 2% target and 0.1 percentage point reductions from the previous survey conducted in April.

The report came one day after the ECB held its interest-rate policy and bond-buying program steady. In a news conference following the meeting, ECB President Mario Draghi said he didn't see convincing signs of inflation picking up, suggesting that stimulus could remain in place at least through 2018.

In recent trading, the yield on the 10-year German bond was hovering around 0.500%, according to Tradeweb, after settling at 0.538% Thursday.

Mr. Draghi on Thursday was "a little more dovish than what market participants were looking for," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson.

Also Thursday, the Bank of Japan left its bond-buying program unchanged but pushed back the date when it expects 2% inflation.

Bond buying from the ECB and the BOJ has played a large role in pushing down government-bond yields in the developed world to historically low levels.

Analysts have warned that the value of government bonds would fall when these central banks reduce purchases.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

U.S. government bonds strengthened Friday, extending a two-week rally as investors continued to dial back expectations for inflation and tighter monetary policy.

The yield on the 10-year Treasury note settled at 2.232%, down from 2.266% Thursday and 2.319% a week earlier.

Yields, which fall when bond prices rise, have declined with few interruptions over the past 10 trading sessions, retracing much of their climb from a recent selloff.

Investors and analysts have attributed the rally in part to a change in tone from Federal Reserve officials, who have signaled that tepid inflation could cause the central bank to raise interest rates more slowly than previously anticipated.

In addition, European Central Bank officials have also tamped down speculation about an imminent shift toward less monetary stimulus.

An ECB survey released Friday showed forecasters see annual inflation in the eurozone running at 1.5% this year, 1.4% next year and 1.6% in 2019, all below the ECB's 2% target and 0.1 percentage point below the projections made in the previous survey conducted in April.

The report came one day after the ECB held its interest-rate policy and bond-buying program steady. In a news conference following the meeting, ECB President Mario Draghi said he didn't see convincing signs of inflation picking up.

The yield on the 10-year German bond closed Friday at 0.504%, according to Tradeweb, having settled at 0.538% Thursday.

Mr. Draghi on Thursday was "a little more dovish than what market participants were looking for," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson.

Also Thursday, the Bank of Japan kept its bond-buying program steady but pushed back the date when it expects 2% inflation.

Bond buying from the ECB and the BOJ has played a large role in pushing down government-bond yields in the developed world to historically low levels.

Analysts have warned that the value of government bonds could fall when these central banks reduce purchases.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

July 21, 2017 16:01 ET (20:01 GMT)