April 18, 2017 / 1:19 PM / 3 months ago

TREASURIES-Bond prices rally on French election, geopolitical concerns

3 Min Read

    * French election uncertainty boosts bond demand
    * Fed rate hike expectations falling

    By Karen Brettell
    NEW YORK, April 18 (Reuters) - U.S. Treasury yields fell on
Tuesday as nervousness ahead of France’s first round of
Presidential elections this weekend and ongoing geopolitical
tensions increased demand for safe-haven U.S. debt.
    French opinion polls show far-right leader Marine Le Pen and
centrist Emmanuel Macron qualifying next Sunday for the May 7
run-off, but the gap with conservative Francois Fillon and
far-leftist Jean-Luc Melenchon has been tightening.             
    Rising tensions between U.S. and North Korea have also put
investors on edge in recent weeks.
    U.S. Vice President Mike Pence reassured Japan of American
commitment to reining in North Korea's nuclear and missile
ambitions on Tuesday, after warning that U.S. strikes in Syria
and Afghanistan showed the strength of its resolve.             
    “There are election fears in France and geopolitical fears
in Asia,” said Gennadiy Goldberg, an interest rate strategist at
TD Securities in New York.
    British Prime Minister Theresa May also called on Tuesday
for an early election on June 8, saying she needed to strengthen
her hand in divorce talks with the European Union by shoring up
support for her Brexit plan.             
    Benchmark 10-year notes             were last up 8/32 in
price to yield 2.23 percent, down from 2.25 percent on Monday.
The yields have tumbled from 2.63 percent on March 14.
    Bonds have also been boosted by falling expectations that
the Federal Reserve will raise interest rates an additional two
times this year, as economic data disappoints and the Trump
administration is seen as less likely to pass fiscal or tax
reforms in the near-term.
    Data on Tuesday showed that U.S. homebuilding fell in March
as the construction of single-family homes in the Midwest
recorded its biggest decline in three years.             
    It came after weaker retail sales and falling inflation data
disappointed investors on Friday.
    Futures traders are pricing in a 44 percent chance the U.S.
central bank will raise rates at its June meeting, down from 71
percent on April 6, according to the CME Group’s FedWatch Tool.

 (Editing by Nick Zieminski)
  
 
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