Treasurys Weaken on German Data

U.S. government bond yields rose along with debt in Germany as a gauge of sentiment among German businesses climbed to a record high, reinforcing the outlook for improving global growth.

The benchmark 10-year Treasury note yield rose to 2.342% from 2.322% Wednesday, its largest increase since Nov. 16. The German 10-year government debt yield rose to 0.36% from 0.347% on Thursday. Bond yields rise as prices fall.

The Ifo Institute said Friday its Business Climate Index rose to 117.5, suggesting the European economy is on track to grow 2.3% this year. That follows a release Thursday from data firm IHS Markit that its composite Purchasing Managers Index for the eurozone rose to its highest level in more than 6 1/2 years.

With the global economy surging, bond yields near record lows may face pressure to rise. "Bond markets are in bubbly territory," said Andrew Brenner, head of global fixed income National Alliance Capital Markets.

One factor holding them back the persistent lack of inflation, about which Federal Reserve officials are showing increasing concern. Minutes from the central bank's October meeting released Wednesday showed officials are expressing greater concern about the absence of discernible pressures for higher consumer prices.

Though those concerns have yet to threaten the trajectory the Fed laid out at its September meeting for raising rates and reducing the size of the balance sheet, they present an additional burden that makes it more difficult for yields to rise above longstanding ranges seen this year. Similarly, robust economic data outside the realm of inflation suggest the chances of moving to the lower end of the range is muted as well.

Investors also remain reluctant to sell bonds and drive yields higher as there is considerable skepticism in the market about whether Republicans in Congress can coalesce around a plan to lower corporate and personal taxes. The plans are expected to support higher stock prices and raise the U.S. debt by roughly $1.5 trillion over the next 10 years.

(END) Dow Jones Newswires

November 24, 2017 15:23 ET (20:23 GMT)