u.s. government bond prices ticked up wednesday, ending a run of declines, as lackluster economic data helped ease the selling pressure that had overwhelmed the market since last week<u+2019>s presidential election. in late-afternoon trading, the yield on the benchmark 10-year u.s. treasury note was 2.222%, compared with 2.240% on tuesday. yields fall when bond prices rise. after climbing again overnight, bond yields began to decline wednesday after the labor department said that u.s. business prices held flat in october, suggesting inflation pressures remain muted despite expectations of an increase next year. economists surveyed by the wall street journal had expected a 0.3% increase. bonds continued to strengthen after the federal reserve said industrial production was also flat last month as mild weather depressed demand for home and office heating. the reports gave investors a rare reason to buy bonds in the wake of last week<u+2019>s election, which had a precipitated a selloff in government debt around the world as investors reacted to donald trump <u+2019>s surprise victory and republicans maintaining control of congress. though initially concerned about mr. trump<u+2019>s antitrade and immigration rhetoric, investors have quickly grown optimistic that the new president will emphasize other parts of his agenda such as tax cuts and increased infrastructure spending, which have the potential to spur growth and inflation and thereby drive down the price of government bonds. inflation is a big threat to longer-term government bonds as it chips away at their value over time. further concerning bond investors, large fiscal stimulus typically requires an increase in government bond issuance , and higher inflation also could lead the federal reserve to raise interest rates more quickly than previously expected. fed-funds futures, a popular derivative market for hedge funds and money managers to place bets on the u.s. interest rate policy outlook, suggested wednesday a 91% probability of a rate increase by the fed<u+2019>s december meeting, according to data from cme group . the odds were 86% monday and 81% late last week. while most investors and analysts believe the bond selloff has been justified, some also have been saying that a pause is overdue given continued economic headwinds and uncertainty surrounding government policy. before wednesday<u+2019>s session, the 10-year note<u+2019>s yield had registered its biggest six-day increase since 2010, pushing up interest rates on everything from corporate bonds to mortgages. the 10-year yield was 1.867% on election day. bonds could rally when investors <u+201c>start to look at the fundamentals again,<u+201d> said ray remy, head of fixed-income trading in new york at daiwa capital markets america inc. <u+201c>people are starting to anticipate five percent gdp growth in the united states and to me that<u+2019>s just nonsense.<u+201d> investors now are roughly divided between two camps, one that remains concerned that yields could rise further as mr. trump outlines and implements his policies and another that feels that yields have climbed <u+201c>too far, too fast,<u+201d> said scott buchta, head of fixed-income strategy at brean capital llc. investors in the second group largely carried the day wednesday, though yields on shorter term bonds were roughly unchanged, reflecting the increasing likelihood of a near-term interest rate increase by the fed. for the second-consecutive day, the 30-year bond was the bond market<u+2019>s top performer, as its yield dropped to 2.925% from 2.972% tuesday. the yield on the two-year note slid to 1.005% from 1.008%. write to sam goldfarb at sam.goldfarb@wsj.com
u.s. government bonds end run of declines - wsj
sam goldfarb