2017.06.2722:29:00UTC+00Treasury Yields Gets Boost from Draghi’s Remarks

U.S. government bond yields rallied after European Central Bank President Mario Draghi signaled that the factors hindering inflation's rise would be temporary, increasing expectations of traders that ECB policymakers are looking to wind down their quantitative easing program by the end of 20117.

The European bond markets saw a wave of selloff on Draghi's comments. The yield on the two-year German bund increased 6.3 basis points to -0.584 percent, the highest in a year. Meanwhile, the spread between the German and U.S. 10-year government bonds tighter to 1.83 percent or 183 bps, the narrowest since November.

The yield on the benchmark 10-year note advanced the most by 6.3 bps to 2.198 percent, the highest since the Fed policy statement release on June 14. The two-year note yield advanced 3.3 bps to 1.369 percent, while the yield on the 30-year bond advanced 4.7 bps to 2.743 percent.

Draghi said a number of factors were hurting the reflationary process but are generally transitory and should not derail inflation from its course over the medium term as long as monetary policy continues to provide solid threshold of inflation expectations.