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Credit Markets: Benchmark Treasury Price Falls -- WSJ

6 Jan 2018 7:32 am
By Gunjan Banerji 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 6, 2018).

U.S. government bonds weakened after the monthly jobs report showed that U.S. employers' hiring slowed in December, while still signaling strength in the labor market.

The yield on the benchmark 10-year U.S. Treasury note rose to 2.476% from 2.452% on Thursday and 2.409% at the close of last week. Yields rise as bond prices fall.

The 10-year yield has climbed recently as U.S. stock indexes rose to fresh milestones, posting gains in four of the past six weeks.

On Friday, the 10-year yield dropped as low as 2.438% after the jobs report indicated employers added 148,000 jobs in December, less than what economists surveyed by The Wall Street Journal had expected. It recovered quickly, with analysts saying the U.S. economy still appears strong, with the unemployment rate staying steady at 4.1% for the third consecutive month and at its lowest level since late 2000.

Signs of an improving economy can threaten the value of government bonds, because faster growth can lead to higher inflation, which chips away at the purchasing power of the debt's fixed payments.

Some investors and analysts said the report didn't significantly change their picture of the U.S. job market or suggest the Federal Reserve might increase its pace of interest-rate increases. A robust private employment figure released Thursday also could have set investor expectations high for Friday morning's report, making it seem initially lackluster, said Jeff MacDonald, head of fixed-income strategies at Fiduciary Trust Company International.

Policy makers have penciled in three rate rises for 2018.

"I don't think this report, disappointing as it might look, will necessarily mean that [the Fed] will look to take three hikes down to two hikes," said Boris Rjavinski, director of rate strategy at Wells Fargo Securities. "We're still looking at more or less the same plan of action."

The 10-year yield's recent climb also comes ahead of the U.S. Treasury Department's scheduled auction of $146 billion of bonds next week, adding new supply to the market.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

(END) Dow Jones Newswires

January 06, 2018 02:32 ET (07:32 GMT)

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