THE WALL STREET JOURNAL. ***** Wednesday, September 11, 2019 |B13
U.S. government-bond
prices fell anew Tuesday, with
the Treasury Department and
a crowded slate of corporate
issuers adding to the supply of
fresh debt.
The yield on the benchmark
10-year Treasury note rose for
a second con-
secutive trad-
ing session,
settling at
1.706%, compared with 1.632%
Monday. The yield has risen
one-quarter of a percentage
point since reaching a three-
year low last Wednesday.
Yields, which rise as bond
prices fall, climbed ahead of the
Treasury’s sale of $38 billion of
three-year notes scheduled for
Tuesday afternoon. The gov-
ernment is scheduled to sell 10-
year notes Wednesday and 30-
year bonds Thursday.
Those auctions are poised
to join this month’s wave of
corporate issuance. Companies
seeking to refinance debt to
take advantage of this year’s
fall in bond yields have inten-
sified the usual September
rush to sell bonds after the
summer holidays.
Investors often sell govern-
ment debt to make room in
their portfolios to purchase
higher-yielding corporate
bonds, or in anticipation of the
Treasury’s auctions.
The rise in yields may also
reflect signs of recent planning
for next month’s trade talks
between the U.S. and China,
some investors said. While
there is little optimism that
those negotiations will bring
about a sharp change, some in-
vestors are cheered by the rel-
ative progress being made on
trade talks and the lack of at-
tention the talks have received
from President Trump.
“The fact that it’s been all
quiet on the trade front has
been reassuring,” said Don El-
lenberger, head of multisector
strategies at Federated Inves-
tors.
BYDANIELKRUGER
Treasurys
Decline
Amid
Bond Sales
CREDIT
MARKETS
subdued this week as investors
await policy decisions from
central bankers this month.
Shares of software compa-
nies and chip makers were
among the biggest decliners,
with both groups coming under
pressure amid anxiety about
the U.S.-China trade dispute
and speculation over a down-
turn in the global economy. Mi-
crosoft and Applied Materialsdropped 1.1% and 0.9%, respec-
tively.
Analysts also monitored Ap-
ple ’s annual showcase, where
the tech company unveiled
three new iPhones. Apple
shares ticked up $2.53, or 1.2%,
to $216.70.
Data released Tuesday
showed U.S. job openings fell
for a second straight month in
July. Job openings, a closelyPrices had dropped during the summer as exports of the fuel ran at or near records in a glutted market. A liquefied-natural-gas tanker in Japan.ISSEI KATO/REUTERSup production that notched a
high in May and wasn’t far off
another in June.
In late May, bets that gas
prices would tumble began to
outnumber wagers that they
would rise, according to U.S.
Commodity Futures Trading
Commission data.
Hedge funds and other
money managers had been
bullish on balance since the
beginning of 2018, but they
correctly forecast this sum-
mer’s unseasonable price
slump and short bets snow-
balled.
By the second week of Au-
gust, natural-gas prices had
reached three-year lows and
speculators had built up their
biggest net short position
since 2008, when the recession
and advances in drilling tech-
nology sent prices on a plunge.
On Aug. 13 speculators held
367,504 contracts short, which
was 235,515 more than they
held in long bets that prices
would rise. One contract
counts for 10,000 million Brit-
ish thermal units, or about
$26,000 of gas at the prevail-
ing price.
As gas prices climbed over
the past month on warmer
forecasts and expectations that
drillers were dialing back,
speculators have reduced their
short bets by about a quarter.
Yet as of Sept. 3, short posi-
tions still outnumbered long
bets by better than 2 to 1, ac-
cording to the CFTC data.
“The shorts get scared orbeyond their risk-management
parameters,” Mr. McNiven
said. “We’re seeing a bit of the
short trade unwind.”
Energy trading consultants
Ritterbusch & Associates told
clients on Monday the firm
shifted away from bearish po-
sitioning, saying “we are cur-
rently in no rush to re-estab-
lish a negative trading bias.”
A similar situation may be
playing out in shares of natu-
ral-gas producers.
On Monday several natural-
gas producers rose more than
10% as gas prices climbed 3.6%.
Among the day’s big gainers
were Chesapeake Energy
Corp. and Gulfport Energy
Corp., which rose 20% and
18%, respectively. Appalachian
gas producers Range Re-
sources Corp., EQT Corp. and
Antero Resources Corp. each
added more than 9%. Some of
these stocks fell again Tuesday.
Those companies have been
among the most heavily
shorted energy stocks this
summer as gas prices
swooned, according to data
compiled by SunTrust Robin-
son Humphrey Inc.
Summer’s segue into au-
tumn is dangerous as investors
try to time the end of air-con-
ditioning season. It was
around this time of year in
2006 when Amaranth Advisors
lost $5 billion on wrong-way
natural-gas bets and had to
shut down in one of the big-
gest hedge fund collapses in
history.A popular wager in the en-
ergy markets is backfiring.
Hedge funds and other
money managers in August
built up a big bet that natural-
gas prices would decline—their
most bearish position in the
futures mar-
ketinovera
decade—
only to have prices shoot up
25%.
Prices usually weaken when
summer subsides since there is
less demand to generate elec-
tricity for air conditioners.
Forecasts for a steamy Sep-
tember have pushed prices
higher, though.
Analysts suspect that buy-
ing by speculators hoping to
cover up errant bets that
prices would fall are sending
prices even higher than
weather forecasts warrant.
Natural-gas futures for Oc-
tober delivery closed at $2.58
per million British thermal
units on Tuesday, up 25% from
a three-year low of $2.07 that
was reached on Aug. 5.
“An extension of summer
helps, but it’s not game chang-
ing like what we’re seeing go-
ing on in the market,” said Jor-
dan McNiven, an analyst with
Houston investment bank Tu-
dor, Pickering, Holt & Co.
Exports and consumption by
power plants have run at or
near records this summer. The
glutted market has needed ev-
ery bit of added demand to sopBYRYANDEZEMBERHedge Funds Pay for Betting
Against Natural-Gas Prices
COMMODITIES
AUCTIONRESULTS
Here are the results of Tuesday's Treasury auctions.
All bids are awarded at a single price at the market-
clearing yield. Rates are determined by the difference
between that price and the face value.
52-WEEK BILLS
Applications $78,781,801,300
Accepted bids $28,000,217,300
" noncompetitively $375,451,300
" foreign noncompetitively $1,700,000
Auction price (rate) 98.240667
(1.740%)
Coupon equivalent 1.793%
Bids at clearing yield accepted 70.53%
Cusip number 912796TJ8
The bills, dated Sept. 12, 2019, mature on Sept. 10,
2020.
THREE-YEAR NOTES
Applications $92,116,674,200
Accepted bids $38,000,053,000
" noncompetitively $33,459,200
" foreign noncompetitively $50,000,000
Auction price (rate) 99.787062
(1.573%)
Interest rate 1.500%
Bids at clearing yield accepted 74.98%
Cusip number 912828YF1
The notes, dated Sept. 16, 2019, mature on Sept. 15,
2022.
MARKETS
watched measure of labor-
market health, dropped 3%
from a year earlier in July to
7.217 million after declining 2%
in June, the Labor Department
said in its latest Job Openings
and Labor Turnover Survey.
“The U.S. economy is doing
just fine with the consumer
very strong, while unemploy-
ment is still low,” said Thomas
Martin, senior portfolio man-
ager at Globalt Investments.
“How central banks act and
what their language is will give
a clue as to whether or not
there’s a sustained potential for
an economic recovery or
whether we’re still on the
edge.”
Investors await meetings
this month where central banks
are expected to lower borrow-
ing costs. The Federal Reserve
is expected to lower rates by a
quarter percentage point when
it meets next week following a
weaker-than-expected August
jobs report.
Meanwhile, analysts expect
the European Central Bank will
cut 0.1 percentage point from
benchmark interest rates when
it meets Thursday. As of mid-
September, the market hadbeen pricing in a cut of 0.2 per-
centage point as well as re-
newed quantitative easing, said
Gareth Isaac, chief investment
officer for EMEA fixed income
at Invesco.
In Tuesday’s action, Ford
Motor shares fell 12 cents, or
1.3%, to $9.42, after Moody’s In-
vestors cut the company’s bond
rating to junk status.
Wendy’s stock slumped
$2.24, or 10%, to $19.71, after
the burger chain said invest-
ments in more menu items for
breakfast had prompted it to
adjust guidance for its fiscal
year.
Shares of Wells Fargo
slipped 10 cents, or 0.2%, to
$48.31, after UBS cut its rating
on the bank to “neutral” from
“buy,” saying the bank lacks
visibility on profitability im-
provement.
The Stoxx Europe 600 rose
0.1%.
At midday Wednesday in To-
kyo, the Nikkei was up 0.6%.
Also early in the day, Hong
Kong’s Hang Seng was up 0.4%,
the Shanghai Composite was
down 0.4%, South Korea’s Kospi
was up 0.7% and Australia’s
S&P/ASX 200 was up 0.1%.The Dow Jones Industrial
Average turned higher in the fi-
nal minutes of the session to
extend its winning streak to
five days.
The blue-chip index climbed
73.92 points, or 0.3%, to
26909.43, leav-
ing the bench-
mark 1.6% be-
low July’s
record. Dow
Inc., Boeing and Caterpillar led
the way.
The S&P 500 edged up 0.96
point, or less than 0.1%, to
2979.39, but the technology-
heavy Nasdaq Composite
slipped 3.28 points, or less than
0.1%, to 8084.16.
Investors rotated out of
high-growth tech stocks in fa-
vor of beaten-down sectors like
energy, for the second consecu-
tive session. The shift coincided
with a rise in government-bond
yields—the yield on the 10-year
Treasury edged up to 1.706%
from 1.632% Monday. Bond
yields and prices move in oppo-
site directions.
Trading has been relativelyBYJESSICAMENTON
ANDCAITLINOSTROFFDow Extends Streak on Late Jump
GrowthWoes
SharesofsoftwarecompaniesandchipmakersslumpedTuesday
amidfreshworriesoveradownturninglobalgrowth.0–2.5–2.0–1.5–1.0–0.5%9:30 10 11 noon 1 2 3 4MicrosoftAppliedMaterialsS&P500TUESDAY’S
MARKETSU.S.naturalgaspriceshave
reboundedfromtheirsummerswoon...$3.00 per million British thermal unitsApril May June July Aug. Sept....aclimbinpricesthismonthhas
slowedaplungeinproducers'shares.Source: FactSet20–70–60–50–40–30–20–10010%April May June July Aug. Sept.RangeResourcesEQTCabotOil&GasAnteroResources2.002.202.402.602.80Value stocks are showing
life.
Over the past decade, value
stocks—traditionally those
with a low price-to-book ra-
tio—have underperformed
their growth counterparts in
all but one year.
But for the past two days,
there has been a shift.
Value stocks had one of
their best days relative to
growth shares since the finan-
cial crisis on Monday, Jon-
esTrading said in a research
note. That trend continued
Tuesday. The rebound in Trea-
sury yields is one possible cat-
alyst as investors sold shares
of higher-growth technology
companies in favor of buying
beaten-down energy and finan-
cial stocks.
The Russell 2000 Value In-
dex is up 3.9% over the past
two days, compared with the
Russell 2000 Growth Index’s
1.2% gain. So far this month,
the value index is up 5.4%,
making up nearly all of Au-
gust’s drop. The growth index
is up 1.2% in September, versus
a 4.4% loss the prior month.
BYCORRIEDRIEBUSCH
Value
Stocks
Make
Comeback
followed a similar trajectory,
losing 0.3% to end at $62.38 a
barrel on London’s ICE Futures
exchange.
The departure of Mr. Bolton,
a policy hawk who has been ag-
gressive toward major oil pro-
ducers Iran and Venezuela,
could mean an eventual loosen-
ing of U.S. sanctions against
both those nations, analysts
said. That in turn could mean
more global supply of crude.
“Bolton is a known hawk on
Iran, and the market is assum-
ing that opens the door for
talks with Iran,” said Phil Flynn,
senior analyst at the Price Fu-tures Group.
Crude production in Venezu-
ela and Iran—both under U.S.
export bans—has declined by a
combined 2.1 million barrels a
day in the past year. That has
helped buoy prices amid con-
cerns that the world is over-
supplied with oil.
Prices have been shocked
higher several times this year
amid mounting hostilities be-
tween Iran and other nations,
including the country’s July sei-
zure of oil tankers that were
passing through the Strait of
Hormuz, the waterway that
connects the Persian Gulf to theGulf of Oman and an important
shipping route for oil.
Mr. Bolton has been a long-
time proponent of regime
change in Iran. In May, he di-
rectly blamed Tehran for at-
tacks on ships around the
strait.
Just before noon Tuesday
Mr. Trump tweeted, “I in-
formed John Bolton last night
that his services are no longer
needed at the White House. I
disagreed strongly with many
of his suggestions, as did oth-
ers in the administration, and
therefore I asked John for his
resignation, which was given tome this morning.”
U.S. oil prices then dropped
about $1 a barrel, recovering
some, but not all, of the decline
later. The move reinforced the
view that Mr. Trump isn’t eager
to engage in any military con-
flict with Iran and may even
suggest that talks between the
U.S. and Iran, following the
2018 U.S. withdrawal from an
Iran nuclear deal, are more
possible than earlier thought.
RBC Capital Markets analyst
Helima Croft said the ouster
“could be a catalyst for a mate-
rial de-escalation in the Iran
standoff.”U.S. oil prices fell about $1 a
barrel Tuesday when President
Trump announced via Twitter
that he had asked for and ac-
cepted the resignation of na-
tional security adviser John
Bolton.
Oil prices bounced back
some but still ended lower on a
day in which they started out
trading up. Crude settled down
45 cents, or 0.8%, at $57.40 a
barrel on the New York Mer-
cantile Exchange. Brent crude,
the global oil price benchmark,BYRYANDEZEMBER
ANDDANMOLINSKIOil Falls on Exit of Bolton, a Hawk on Iran Sanctions