U.S. Government Bond Prices Edge Higher

U.S. government bond prices edged higher Monday, extending last week's rally spurred by soft inflation data and signs the Federal Reserve could slow the pace of its interest-rate increases.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.309% compared with 2.319% Friday, declining for the fifth time in six sessions. Yields fall when bond prices rise.

Bond prices got a boost last Wednesday when Fed Chairwoman Janet Yellen said in congressional testimony that the central bank could reassess its plan to raise interest-rates if inflation remains stuck below its 2% annual target. On Friday, that message was reinforced by a report showing a further slowdown in inflation.

While the Fed has raised interest rates twice this year, investors are now increasingly skeptical that there will be another rate increase this year.

Investors are "continuing trying to process what happened last week with the combination of the inflation data and what we heard from Yellen in Washington," said Thomas Simons, senior vice president and money-market economist in the fixed-income group at Jefferies LLC.

This week is relatively light on economic data, and no Fed officials are scheduled to talk ahead of their July 25-26 policy meeting.

One major event is Thursday's European Central Bank meeting, which will be closely watched for signs that the ECB is planning to scale back its monetary stimulus.

Concern among investors that major central banks outside of the U.S. could shift to tighter monetary policy was a big factor behind a recent selloff in global debt.

Yields did rise last week following a report from The Wall Street Journal that ECB President Mario Draghi is scheduled to address the Federal Reserve's Jackson Hole conference in August.

Mr. Draghi is expected to give further signs of the ECB's growing confidence in the eurozone economy and its reduced need for monetary stimulus, the Journal reported.

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

(END) Dow Jones Newswires

July 17, 2017 16:40 ET (20:40 GMT)