U.S. Government Bonds Tread Water Ahead of Auctions

U.S. government bonds stalled Tuesday as a dearth of data on the economic calendar shifted investors' attention to developments in Washington.

The yield on the benchmark 10-year U.S. Treasury note was recently at 2.320%, according to Tradeweb, compared with 2.318% Monday. Yields rise as bond prices fall.

Bond prices have generally risen in recent days to recoup some of their losses from October, something some analysts have attributed to relief among investors over a number of developments that were expected to potentially jolt the markets.

Among them: President Donald Trump nominated Federal Reserve Board Governor Jerome Powell to be the next Fed chairman, easing some investors' fears that Mr. Trump would choose a candidate likely to favor a more aggressive pace of interest-rate increases. And Republicans have run into conflict over a deficit-expanding tax bill, raising the possibility that lawmakers will have to scale back their plans to pass the overhaul by year's end.

The initial rollout of the bill had pressured bonds, sending the yield on the 10-year Treasury note to its biggest one-day gain since March.

With few economic reports scheduled for release this week, analysts say investors' attention is likely to stay homed in on Washington, where the House Ways and Means Committee is in the process of debating the tax plan.

"The fact that the Treasury market remains rangebound with 10-year yields flirting with 2.30% speaks to the relevance of the debate in Washington at this particular moment," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a note Tuesday.

Later Tuesday, the U.S. Treasury Department will hold auctions for the 4-week bill, 52-week bill and 3-year note. Fed Chairwoman Janet Yellen is also expected to deliver a speech in Washington.

Write to Akane Otani at akane.otani@wsj.com

U.S. government bonds inched higher Tuesday as a dearth of data on the economic calendar shifted investors' attention to developments in Washington.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.309% -- the lowest closing level since Oct. 17 -- compared with 2.318% Monday. Yields fall as bond prices rise.

Bond prices have risen for four consecutive days to recoup some of their losses from October, something some analysts have attributed to relief among investors over a number of developments that were expected to potentially jolt the markets.

Among them: President Donald Trump nominated Federal Reserve Board Governor Jerome Powell to be the next Fed chairman, easing some investors' fears that Mr. Trump would choose a candidate likely to favor a more aggressive pace of interest-rate increases. And Republicans have run into conflict over a tax bill, raising the possibility that lawmakers will have to scale back their plans to pass the overhaul by year's end.

The initial rollout of the bill had pressured bonds, sending the yield on the 10-year Treasury note to its biggest one-day gain since March. A bill that expands the deficit could prompt more bond issuance, weighing on the prices of existing debt.

"No one is really confident what kind of tax package we're going to get, " said Joe Tanious, senior investment strategist at Bessemer Trust, who added that the proposal is likely to change several times before being signed into law.

A steep cut to the corporate tax rate could send stocks and bond yields higher by spurring inflation, a key threat to government bonds. Still, Mr. Tanious said, foreign demand for Treasurys -- which have generally carried higher yields than their counterparts in other developed markets -- would likely limit any resulting selloff in bonds.

"When you look around the world, the yield on the Treasury doesn't seem bad, and that's helping keep a lid on interest rates moving too high," Mr. Tanious said.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

November 07, 2017 16:05 ET (21:05 GMT)