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Treasurys Weaken After Signs of Progress to Avert Government Shutdown

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12/07/2017 | 11:32pm CET
By Daniel Kruger 

U.S. government-bond prices weakened after signs of progress on efforts to avert a government shutdown.

The yield on the 10-year Treasury note rose to 2.374% on Thursday from 2.330% Wednesday. Bond yields rise when prices fall.

The largest one-day yield gain in almost a month came after the House on Thursday passed a two-week stopgap spending bill, deferring until later in the month a bigger fight over what issues should be resolved before Congress adjourns for the year. Some analysts said the threat of a shutdown had prompted recent buying.

The rise in yields also came ahead of Friday's jobs report and next week's meeting of the Federal Reserve, when officials are expected to raise interest rates. The 10-year yield has remained within a relatively narrow range in recent sessions as investors have looked for signs about the course of monetary policy.

Central-bank officials have signaled that they will raise rates at their Dec. 13 meeting. They also will release their forecasts for the economy and the path of interest-rate policy in coming years. Investors will be watching to see whether central bankers revise the forecast they issued at their September meeting for three interest-rate increases in 2018.

Many investors say that they expect more Fed rate increases to fuel a continuation of the trend toward a flatter yield curve, in which the gap between two- and 10-year yields narrows as shorter-term rates rise faster than those in the longer term. Two-year Treasury yields, which are most responsive to expectations about Fed policy, have risen more than 0.6 percentage point this year, while 10-year yields have fallen.

"We're seeing accounts move from shorter-term securities to longer-term ones," said Thomas di Galoma, head of Treasury trading at Seaport Global Holdings. "The Fed has several more moves they want to make next year."

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