Treasurys Tick Higher Following Release of Funding Plans
Prices on longer-term U.S. government bonds ticked higher Wednesday after the Treasury Department said it would meet increased borrowing needs by boosting the size of short-term debt sales in the coming months more than medium- and long-term debt auctions.
In recent trading, the yield on the benchmark 10-year Treasury note was 2.718%, according to Tradeweb, compared with 2.725% Tuesday. Yields fall when bond prices rise.
Outlining its issuance plans in its quarterly refunding statement, Treasury said it would increase the auction sizes of two- and three-year notes by $2 billion a month starting in February, while five-, seven-, 10-, and 30-year debt auctions will go up by $1 billion.
Analysts characterized the announcement as largely unsurprising. Nevertheless, it removed an immediate threat to 10-year notes, which have come under pressure this year as investors have bet on better global growth and rising U.S. inflation.
Increasing the size of auctions tends to weigh on the prices of outstanding bonds as it expands the supply of debt relative to uncertain demand.
"Everybody knew from November that they were going to increase the short-tend the most, but until you actually see what they're going to do in the long-end you can't position too hard in that direction," said Jim Vogel, interest-rates strategist at FTN Financial.
Later Wednesday, investors will focus on the conclusion of the Federal Reserve's January meeting, the last before Chairwoman Janet Yellen gives way to Fed governor Jerome Powell. The central bank isn't expected to raise interest rates at the meeting, but investors will dissect its policy statement for clues about the future path of rates.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
U.S. government-bond prices were little changed Wednesday as investors dissected the latest policy statement from the Federal Reserve and funding announcement from the Treasury Department.
The yield on the benchmark 10-year Treasury note settled at 2.722%, compared with 2.725% Tuesday.
Yields, which fall as bond prices rise, declined early in the day after Treasury said it would meet the government's increased borrowing needs by boosting the size of short-term debt sales in the coming months more than medium- and long-term debt auctions.
Traders, however, quickly booked profits, and yields climbed for much of the day before dipping just before the close.
In the end, the Fed's statement had a muted impact on the market. As expected, the central bank kept short-term interest rates unchanged but made note of rising inflation expectations, doing little to dispel the widely held view that it will next raise rates in March.
The 10-year yield narrowly missed its ninth increase out of the past 11 trading sessions. A run of strong economic data and the recent passage of corporate tax cuts have bolstered investors' expectations of growth and inflation, which is a main threat to government bonds because it chips away at the purchasing power of their fixed returns and makes it easier for the Fed to tighten monetary policy.
Outlining its issuance plans in its quarterly refunding statement, the Treasury on Wednesday said it would increase the auction sizes of two- and three-year notes by $2 billion a month starting in February, while five-, seven-, 10-, and 30-year debt auctions would go up by $1 billion.
Analysts characterized the announcement as largely unsurprising, but it still removed an immediate threat to 10-year notes, which could have come under more pressure if Treasury officials had arrived at a different financing mix. Increasing the size of auctions tends to weigh on the prices of outstanding bonds as it expands the supply of debt.
"Everybody knew from November that they were going to increase the short-end the most, but until you actually see what they're going to do in the long-end you can't position too hard in that direction," said Jim Vogel, interest-rates strategist at FTN Financial.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
January 31, 2018 15:53 ET (20:53 GMT)