BOND REPORT: Treasury Yields Pare Rise After PPI, Industrial Production DOW JONES & COMPANY, INC. 9:41 AM ET 11/16/2016 Though they remain on track to rise for a 7th straight session
Treasury prices trimmed losses but remained on track to fall for a seventh straight session, after data showed inflation at the wholesale level was essentially flat in October.
Yields, which rise as prices fall, touched their highest levels since late 2015 earlier in the session.
The 10-year yield rose four basis points to 2.272%, while the two-year yield added two basis points to 1.025%. The 30-year climbed 0.2 basis point to 2.961%.
Even as yields pared their rise, many investors were bracing for the selloff to continue, though some believe a brief period of relief might be on the horizon.
"We're waiting for any small consolidation just because it seems like too much too fast, though we're positioned with the expectation that the trend will continue," said David Schnautz, fixed income strategist at Commerzbank.
Speaking Tuesday afternoon, Fed Vice Chairman Stanley Fischer said there's no evidence that liquidity in bond markets has eroded since the financial crisis (http://www.wsj.com/articles/federal-reserves-stanley-fischer-market-liquidity-is- adequate-1479236985), implying that the Fed isn't worried about the recent market volatility, which has contributed to an aggressive tightening of financial conditions, Schnautz said.
"It doesn't look like the high-profile decision makers are getting cold feet," Schnautz said.
On Thursday, investors will hear from Fed Chairwoman Janet Yellen, who Schnautz expects to suggest that the central bank is prepared to raise interest rates at its December meeting--an eventuality that has already been priced in to the bond market.
Afterward, "the focus will shift to 2017, which gives the market potential to price in more rate hikes," Schnautz said.
The global bond-market rout showed signs of slowing on Tuesday as yields declined early in the U.S. trading day. But they soon picked back up, ending the day at their highest levels since Jan. 5. (http://www.marketwatch.com/story/ treasury-yields-fall-as-aggressive-selloff-stalls-2016-11-15)The pause allowed for speculation that the selloff, inspired in part by Donald Trump's victory in the U.S. presidential election, may have temporarily exhausted itself (http://www.marketwatch.com/story/has-the-trump-inspired-bond-rout-exhausted-itself-2016-11-15).
"The tone of the market appears to be shifting with regards to the speed of the selloff and while we're not seeing enough dip buying to pull rates back just yet, we are seeing signs of money being put to work overnight in Treasurys and in credit," wrote Aaron Kohli and Ian Lyngen, fixed income strategists at BMO Capital Markets.
(END) Dow Jones Newswires 11-16-160941ET Copyright (c) 2016 Dow Jones & Company, Inc.
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