DislikedTreasury yields add to gains amid signs of a pickup in inflation Treasury yields on Wednesday saw some selling pressure, pushing yields higher, as U.S. economic reports delivered signs of rising inflation. In the latest U.S. inflation reading, the Consumer Price Index rose 0.3% in December, while core CPI, which excludes food and energy, rose 0.2%. The index rose 2.1% over all of 2016, its fastest pace since 2011. Separately, industrial...Ignored
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U.S. government bonds had been lower throughout the session, as investors looked ahead to the European Central Bank’s first policy meeting of 2017, which will occur on Thursday and could shed some light on European monetary policy in a year likely to be driven by geopolitical events.
“ In general, we have a bearish bias towards Treasurys and expect a further selloff,” said Marc-Henri Thoumin, rates strategist at Société Générale.
“We expect inflation to keep rising, and think this will be the driver for the coming year.”
Yields have been in a steady uptrend over the past six months, ever since the 10-year touched an all-time low around 1.36% in July, though the move accelerated after the November election of Trump, whose policies, including ramping up fiscal spending, are expected to stoke inflation. Rising inflation erodes the value of a bond’s fixed payments. Typically, when inflation is on the rise, bond investors demand higher yields to compensate for the corrosive effect that higher prices have on real returns.
However, the gain in yields appears to have stalled of late, with yields retreating from a recent high near 2.6% hit in mid-December.
Looking ahead, Thursday’s ECB meeting will be the next important event for Treasurys. At the ECB’s last meeting, the central bank extended its bond-buying program by nine months, although it reduced the pace of its purchases beyond March. Any additional details on the political or monetary environment will be closely watched, especially as President-elect Donald Trump will be sworn in as the U.S.’s 45th president on Friday.
Investors may be looking for more clarity on Trump’s legislative priorities and policy details before establishing longer-term investment strategies.
The announcement comes out at 7:45 AM EST and the most important part is the Press Conference starting at 8:30 AM EST !!!
Benjaminis
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