Bond Report: U.S. Treasury yields rise before $62 billion debt auction

United States

U.S. Treasury yields edged higher early Tuesday as investors eyed a debt auction and a midweek Federal Reserve meeting.

What are Treasurys doing?

The 10-year Treasury note yield BX:TMUBMUSD10Y was at 1.583%, up 1.5 basis points from Monday. The 30-year bond rate BX:TMUBMUSD30Y edged 1.4 basis point higher to 2.257%, while the 2-year note yield BX:TMUBMUSD02Y added 0.6 basis point to 0.176%.

What’s driving Treasurys?

The highlight of Tuesday’s trading is a $ 62 billion sale of 7-year notes, the last U.S. Treasury debt auction of the week. A poor showing for sales of this maturity provided the spark for a sharp bond-market selloff back in late February that sent the 10-year Treasury note yield above 1.60% for the first time in a year.

The Fed will kick off its two-day policy meeting on Tuesday. Analysts aren’t expecting a change in tone or any major policy decisions, instead touting the June meeting as the one to watch for clues on when the U.S. central bank might start tapering asset purchases.

The Bank of Japan said that it expected inflation would fail to reach the central bank’s 2% target until 2024 as the coronavirus pandemic intensified. The BOJ also said it would be willing to extend its pandemic relief program beyond the September deadline.

In U.S. economic data, the Conference Board’s consumer confidence index for April is due at 10 a.m. ET.

What did market participants say?

“Resurging Covid-19 numbers in other corners of the world injected some caution after an abundance of market optimism, but eventually the Fed will come round and have to acknowledge the progress, even if that’s not tomorrow,” said Antoine Bouvet, senior rates strategist at ING.