BOND REPORT: Treasury Yields Rise Amid Strong Data, Corporate Earnings
October 24 2016 - 1:37PM
Dow Jones News
By Joseph Adinolfi, MarketWatch
Market is focused on M&A activity, analyst says
Treasury prices fell on Monday, pushing yields higher, as strong
corporate earnings, a series of merger announcements, and robust
U.S. data supported stocks at the expense of safety plays like
government bonds.
U.S. stocks trimmed earlier gains, but remained higher on
Monday, with the Dow Jones Industrial Average up 80 points at
18,226.
Shares of T-Mobile gained 5.2% (TMUS) after the mobile carrier
said it added 2 million customers in the third quarter.
Over the weekend, AT&T Inc. (T) agreed to buy Time Warner
Inc(TWX) for $85 billion in cash and stock, while Rockwell Collins
Inc. (COL) said it would pay $6.4 billion for B/E Aerospace Inc.
(BEAV). Shares of both AT&T and Time Warner fell on Monday.
Meanwhile, B/E Aerospace soared and Rockwell Collins skidded.
"The market is 110% focused on the massive mergers that came
through over the weekend," said Guy LeBas, chief fixed income
strategist at Janney Montgomery Scott.
The 10-year yield added 3.5 basis points at 1.768%, erasing some
of its weekly drop from last week, which was the largest in a
month. The gap between the two-year and 10-year Treasury yields
widened by about two basis points, with the two-year gaining 1.2
basis point to 0.840%. The 30-year yield climbed to 2.523%, three
basis points higher than its late-Friday level.
Strong U.S. data weighed on demand for Treasurys, as investors
saw the likelihood of a December interest-rate hike increase
marginally. In a preliminary reading, the October Markit purchasing
managers index, a monthly survey of certain companies, rose to
53.7. In theory, a higher base rate would push yields higher across
the curve, with the largest moves seen in the short end.
"While October's manufacturing figures are nothing to get too
excited about, they do at least provide some sense of growth
following a drop in September," said Paul Sirani, chief market
analyst at Xtrade.
Investors also heard from a bevy of Fed officials. Speaking to
an academic group in Fayetteville, Ark., St. Louis Fed President
James Bullard argued that the Fed should raise interest rates
slowly in the years ahead as the real rate of interest is expected
to remain subdued
(http://www.marketwatch.com/story/fed-only-needs-to-nudge-up-interest-rates-despite-being-very-close-to-its-targets-bullard-says-2016-10-24).
Bullard's comments had little impact on the market, perhaps because
his views in favor of rates remaining lower for longer, are already
widely known.
New York Fed President William Dudley talked about the need for
more transparency in the Treasury market in his opening remarks at
the Fed's second annual Treasury conference--but said nothing about
his views on monetary policy.
Yields added to their advance after Chicago Fed President
Charles Evans said the Fed should tie the pace of future
interest-rate hikes to inflation.
(http://www.marketwatch.com/story/feds-evans-wants-to-tie-pace-of-interest-rate-hikes-to-inflation-performance-2016-10-24)
(END) Dow Jones Newswires
October 24, 2016 14:22 ET (18:22 GMT)
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