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Bonds News

TREASURIES-Yields fall as Trump adopts populist, over fiscal, tone

(Recasts with Trump inauguration, adds quotes, updates prices)
    * Yields fall from 2-1/2 week highs
    * Trump adopts populist tone in inauguration speech
    * Treasury to sell $88 bln short, intermediate notes next
week

    By Karen Brettell
    NEW YORK, Jan 20 (Reuters) - U.S. Treasury yields fell from
two-and-a-half-week highs on Friday after Donald Trump adopted a
populist tone as he was sworn in as U.S. president, raising some
concerns that fiscal stimulus efforts may be delayed.
    Trump pledged to pursue "America First" policies in an
inaugural address that was a populist, anti-Washington rallying
cry. 
    "When he got a little more anti-establishment you could see
the yields dropping a little bit," said Aaron Kohli, an interest
rate strategist at BMO Capital Markets in New York.
    "To some extent the market sees his honeymoon period where
he has license to help get more legislation passed as fairly
brief, and the risk is that if he diverts conversation to more
populist topics that the market will have a harder time
believing that he will get a lot of the other stuff, the fiscal
policy, the stimulus, the infrastructure, passed as well," Kohli
said.
    Investors have bet that Trump will boost infrastructure to
grow the economy.
    New Treasury supply to finance any new government spending
is also likely, which may further drag on bonds and send yields
higher.
    "Clients believe that what you are going to see down the
road is more supply by this administration," said Tom di Galoma,
managing director at Seaport Global in New York.
    Benchmark 10-year notes fell 3/32 in price to
yield 2.47 percent, after earlier rising to 2.51 percent, the
highest since Jan. 3. The yields have jumped from a low of 2.31
percent on Tuesday.
    Bond prices had tumbled since a speech by Federal Reserve
Chair Janet Yellen on Wednesday was viewed by some investors as
more hawkish than expected.
    "Waiting too long to begin moving toward the neutral rate
could risk a nasty surprise down the road - either too much
inflation, financial instability, or both," Yellen said.
 
    "The thing that got the ball rolling on it was an
interpretation by some that Yellen was a little bit more
hawkish," said Lou Brien, a market strategist at DRW Trading in
Chicago.
    Brien noted, however, that Yellen has made similar comments
in speeches over the past few years.
    Comments by Yellen late on Thursday were viewed by the
market as more dovish. 
    Expectations of heavy corporate supply next week also
weighed on the market. The Treasury Department will also sell
$88 billion next week in two-, five- and seven-year notes.
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