July 11, 2017 / 4:29 PM / 17 days ago

TREASURIES-U.S. yields edge higher in line with Europe, ahead of Fed's Yellen

3 Min Read

    * Focus on testimony of Fed's Yellen
    * News on Trump Jr's e-mails briefly pushes U.S. yields
lower
    * U.S. to auction 3-year notes.

 (Adds fresh comment, political news; updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 11 (Reuters) - U.S. Treasury yields were flat
to slightly higher on Tuesday in choppy trade, tracking modest
gains in Europe, as investors focused on upcoming congressional
testimony from Federal Reserve Chair Janet Yellen that could
shed more light on the pace of U.S. interest rate hikes.
    Long-dated yields briefly turned lower after President
Donald Trump's eldest son released an email chain, which
referred to a top Russian government prosecutor as offering the
Trump campaign damaging information about Democratic rival
Hillary Clinton.             
    "This suggests that allegations the Trump campaign colluded
with Russia are not yet settled," said Gennadiy Goldberg,
interest rates strategist at TD Securities in New York. "At the
margin, this draws attention away from President Trump's
economic agenda."
    The market's focus, however, remained on Yellen.
    The Fed chair will deliver her semi-annual monetary policy
testimony before the House Financial Services Committee on
Wednesday and the Senate Banking Committee on Thursday. 
    Investors will also be looking to Yellen for clues on when
the Fed will start unwinding its massive balance sheet.  
    San Francisco Federal Reserve Bank President John Williams
said in Sydney earlier on Tuesday that he still expected one
more increase in interest rates from the Fed this year and for
the U.S. central bank to start unwinding its massive balance
sheet in the next few months.             
    Yields, which move inversely to prices, dipped on Monday in
what analysts said was a retracement of previous gains that were
fueled by last week's robust U.S. non-farm payrolls report for
June and recent comments by Fed officials on upcoming rate
hikes. 
    "The Treasury market is in a holding pattern as we approach
the more meaningful events on the immediate horizon," said Ian
Lyngen, head of U.S. rates strategy at BMO Capital Markets in
New York.
    U.S. Treasuries were also trading in tandem with European
bonds, with the region's yields drifting slightly higher.
            
    In midday trading, the benchmark 10-year Treasury note
yielded 2.373 percent            , up slightly from 2.371
percent late on Monday.
    U.S. 30-year yields             were at 2.925 percent,
compared with Monday's 2.923 percent. 
    Later on Tuesday, the U.S. Treasury will auction $24 billion
in three-year notes.
    Nomura Securities was optimistic about demand for U.S.
three-year notes, noting that investors may still want to own
some front-end paper "given the languishing wage growth could
dampen some optimism in the Fed's outlook."

 (Reporting by Gertrude Chavez-Dreyfuss; editing by Steve
Orlofsky, G Crosse)
  
 
 

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