U.S. Government Bonds Advance After Trump Campaign Chief Indicted -- Update

U.S. government bonds gained after Special Counsel Robert Mueller issued his first indictments in a probe into Russian meddling in the 2016 election.

The yield on the benchmark 10-year U.S. Treasury note fell to 2.374% from 2.426% Friday in its biggest one-day decline since Sept. 5, when Hurricane Irma made landfall on Florida. Bond yields fall as prices rise.

Government bonds strengthened as Paul Manafort, the former chairman of President Donald Trump's 2016 campaign, was taken into custody Monday on charges that he laundered more than $18 million in funds from his work for a pro-Russia party in Ukraine through offshore accounts. Mr. Manafort pleaded not guilty in court. A spokesman has said Mr. Manafort didn't collude with the Russian government to help Moscow interfere in the 2016 election.

Mr. Mueller has also been investigating whether Mr. Trump obstructed justice in his firing of FBI Director James Comey, and the business dealings of several former Trump aides, according to people familiar with the matter.

Some investors said the charges may divert Mr. Trump's attention from his legislative priorities, most prominently the push to revamp the tax code by reducing rates for corporations and many individuals. Bond yields rose last week after Congress passed a budget resolution that paved the way for tax cuts, which many investors say could boost economic growth and reduce demand for government bonds.

"It can't be good," said David Coard, head of fixed income at Williams Capital Group. "There's going to be speculation on how this impacts the legislative and executive agenda in Washington."

The extent of the rally may be mitigated by expectations that events this week could have a significant impact on investors' views about the direction of the economy and Federal Reserve policy, some analysts said. Mr. Trump is expected to announce his pick to head the central bank some time this week, while the Labor Department is scheduled to release employment data on Friday.

The employment data could be particularly important, given that Fed officials have forecast that they would raise interest rates once more this year, and three more times in 2018. Data today showed that the core measure of inflation targeted by the central bank, personal-consumption expenditures, rose 0.1% in September, and is up 1.3% from a year ago, which is significantly lower than the 2% level targeted by the Fed.

(END) Dow Jones Newswires

October 30, 2017 16:43 ET (20:43 GMT)