21 July 2018

Treasury Prices Fall as Auction Looms

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Treasury prices fell Wednesday as investors brushed off a series of discouraging economic items and focused on an impending U.S. government debt auction.

In early New York trading, benchmark 10-year notes lost 3/32 in price to yield 2.608%, according to Tradeweb. The 30-year bond declined 8/32 to yield 3.394%, while two-year notes edged a tad lower to yield 0.431%. Bond yields rise when prices fall.

Those losses came despite general weakness in overseas stock markets and a string of disappointing data reports out overnight, including a slip in China's service activity and unexpected drop in Germany's factory orders. U.S. productivity in the first quarter reported Wednesday morning showed a larger-than-expected decline.

With data largely mixed over the past few weeks, the Treasurys market has been confined to a tight range. Investors are unwilling to make bold moves until there is a clearer picture on the U.S. economy and what the Federal Reserve will do next. The 10-year yield has been locked between 2.56% and 2.81% since early February.

The difficulty for bond investors these days is that while there are near-term risks—such a downturn in the recovery or an escalation of tensions in Ukraine that support haven Treasurys—anyone buying at today's prices risks losses if the anticipated pickup in economic growth happens later this year. Many bond analysts expect the 10-year yield to end the year well above 3%.

Click here for the full article in the Wall Street Journal.

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