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BOND REPORT : Treasurys Follow Selloff In European Bonds After Strong Data

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11/10/2017 | 06:44pm CET

By Sunny Oh

10-year Treasury yield edges toward 2.40%

Treasury prices fell on Friday, pulling yields higher, with traders taking a cue from a selloff in European government paper after data showed the eurozone's economic recovery continues apace.

What are Treasury yields doing?

The action in the bond market was concentrated at the long-end of the curve. The 10-year Treasury note yield traded at 2.390%, up from 2.333% late Thursday. While, the 30-year bond yield climbed to 2.873%, from 2.808%.

The 2-year note yield rose to 1.654% versus 1.633%. Bond prices move in the opposite direction of yields.

What's driving the market?

Strong economic data out of the eurozone underlined the currency bloc's continued recovery. That could mean the European Central Bank would be more aggressive in winding down its monetary stimulus program, which is due to be scaled back beginning in 2018.

Investors are also watching the progress of legislation to overhaul the U.S. tax code amid differences between the bills proposed by the House Republicans and their Senate counterparts .

What do market participants say?

"The curve flattening move that took place over the last 8 days is being unwound in massive way. Many fear of more downside in prices as Euro-Govies are on uneasy footing as [are] U.S. Treasurys at the moment," said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, referring to the selloff seen in European sovereign bonds.

The yield curve, which traces yields across Treasury maturities, has flattened in the past two weeks on concerns that the Federal Reserve would raise rates against a backdrop of tepid inflation. A flattening move describes when the gap between short-dated yields and long-dated yields narrows.

"If the global growth story is firming, that would allay not so much the deflation concerns, but the lowflation concerns," said Marvin Loh, senior fixed-income strategist at BNY Mellon.

What else is on investors' radar?

The University of Michigan's consumer sentiment index fell to 97.8 , below the 100.7 forecast by economists polled by MarketWatch.

What other assets are on the move?

European sovereign debt yields headed higher after a solid raft of economic data. French industrial production rose 0.6% in September, slightly higher than the 0.5% consensus estimate.

The yield for the 10-year German government bond, or bund, rose 4 basis points to 0.368%, while the 10-year French government bond yield climbed 6.1 basis point to 0.754%

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