TREASURIES-Yields near one-month lows as political risk in focus
REUTERS 9:32 AM ET 5/19/2017
* Trump allegations main investor focus
* Fed's Bullard, Williams to speak
By Karen BrettellNEW YORK, May 19 (Reuters) - U.S. Treasury yields rose
slightly on Friday but stayed near one-month lows as investors
considered whether allegations against U.S. President Donald
Trump would disrupt efforts to cut taxes and increase spending.
Bonds gained this week on news that the U.S. Department of
Justice will investigate whether Russian interfered with the
U.S. election and whether there was collusion between the Trump
campaign and Moscow.
Trump on Thursday denied asking former FBI Director James
Comey to drop a probe into his former national security adviser,
Michael Flynn, and Russia.
“The bigger concern about Trump is the derailing of the
Trump agenda,” said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
“It wasn’t just the strength of economic data that has
driven the markets to be more optimistic; part of it was the
expectations that Trump will bolster growth,” Goldberg said.
"The derailing of the Trump agenda would act against that."
Benchmark 10-year notes were last down 3/32 in
price to yield 2.24 percent, up from 2.23 percent late on
Thursday. The yields had fallen to 2.18 percent on Thursday,
their lowest since April 19.
No economic releases are due on Friday to help sway market
reaction, but St. Louis Federal Reserve President James Bullard
and San Francisco Fed President John Williams are both due to
speak.
The Fed is expected to raise rates when it meets in June.
Traders are not pricing in additional increases, though, as
investors are reluctant to take short positions.
“The risk of getting completely crushed by an unexpected
headline, or a leaked tape or memo is too great,” said Goldberg.
"I think that is keeping a lot of investors on the sidelines."
Futures traders are pricing in a 74 percent chance of a June
rate hike, but only a 47 percent likelihood of two or more rate
increases by year-end, according to the CME Group's FedWatch
Tool.
(Editing by Lisa Von Ahn)
)
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