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TREASURIES-Bonds gain as investors wait on French election
April 21, 2017 / 7:01 PM / 5 months ago

TREASURIES-Bonds gain as investors wait on French election

 (Adds comments from Fed's Fischer, Trump on tax, updates
prices)
    * French elections, U.S government spending in focus
    * Trump says tax cuts will be announced next week
    * Treasury to sell $88 bln notes next week

    By Karen Brettell
    NEW YORK, April 21 (Reuters) - U.S. Treasury debt prices
gained on Friday ahead of Sunday’s presidential election in
France, with no major U.S. economic releases due to set market
direction.
    Benchmark 10-year note yields have held in a tight range
since falling to five-month lows on Tuesday, as investors await
a catalyst to determine if bonds will continue their rally.
    Opinion polls suggest that France’s election will likely
come down to a second-round duel between independent centrist
Emmanuel Macron and Marine Le Pen, head of the anti-European
Union and anti-immigrant National Front.             
    “It looks like the market’s getting a little worried about
the French results this week, possibly too strong a showing by
Le Pen,” said Aaron Kohli, an interest rate strategist at BMO
Capital Markets in New York.
    Ten-year notes             gained 4/32 in price to yield
2.23 percent. The 10-year yield briefly dipped to 2.165 percent
on Tuesday, the lowest since Nov. 10, and has tumbled from 2.63
percent on March 14.
    The notes have struggled to hold below strong technical
resistance at yields of around 2.19 percent.
    Bonds prices have been boosted in recent weeks by reduced
expectations that the Federal Reserve will raise interest rates
two more times this year, following disappointing economic data
releases.
    Still, Fed Vice Chair Stanley Fischer said on Friday that
two more U.S. rate increases this year remain an appropriate
plan for the Federal Reserve despite some weak recent economic
data.             
    Investors have also been losing hope that President Donald 
Trump's administration will achieve passage of fiscal or tax
reforms in the near term.
    Bonds pared price gains after Trump told the Associated
Press that he will unveil a tax plan next week that includes
"massive" tax cuts for individuals and businesses.              
    Congress next week will need to pass a short-term spending
bill or risk a government shutdown, which would likely further
reduce expectations of near-term rate increases.
    “They could shut down the government and if that happens the
data the Fed is going to need starts to look pretty sparse,”
said Kohli. “If the government shuts down, June is off the
table.”
    Futures traders are pricing in a 49 percent chance the U.S.
central bank will raise rates at its June meeting, down from 71
percent on April 6, according to the CME Group’s FedWatch Tool.
    The U.S. Treasury Department will sell $88 billion in
two-year, five-year and seven-year notes next week.

 (Editing by Steve Orlofsky)
  
 
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