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Bond Report: Treasury yields inch higher ahead of new home sales report, 2-year auction

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U.S Treasury yields edged higher Tuesday morning as U.S. stocks were seen extending their climb into record territory. An auction of some $60 billion in 2-year notes later in the session also was on investors’ radar.

What yields are doing
  • The 10-year Treasury note yields
    TMUBMUSD10Y,
    1.264%

    1.266%, compared with 1.254% on Monday at 3 p.m. Eastern Time. Yields for government debt move opposite to prices.
  • The 2-year Treasury note yields
    TMUBMUSD02Y,
    0.234%

    0.230%, versus 0.224% a day ago.
  • The 30-year Treasury bond
    TMUBMUSD30Y,
    1.886%

    was yielding 1.889%, compared with 1.872% on Monday.
What’s driving the market?

U.S. equities were catching a bid on Tuesday, extending a gradual increase of appetite for risk that was weighing on government debt ahead of the annual Jackson Hole central bankers symposium that will feature a speech from Federal Reserve Chairman Jerome Powell Friday morning.

On Monday, the Nasdaq Composite booked its 28th record of 2021 and the S&P 500 index narrowly missed its 50th of the year.

Fixed-income investors are doubtful that Powell will offer clarity on the timing and scope of a pullback of the central bank’s monthly purchases of Treasurys and mortgage-backed securities, which have served as stimulus for the markets since the spread of COVID-19 in the U.S. began in the spring of 2020.

Growing numbers of U.S. government and employer vaccine mandates and some evidence that new daily cases of the highly transmissible coronavirus delta variant are cresting may also be contributing to less haven purchases and a softer demand for Treasurys.

Looking ahead, investors will be watching for appetite for a sale of short-term bonds that could influence trading in 2-year notes.

On the U.S. economic front, investors are awaiting data on new home sales, due at 10 a.m. Eastern Time. Some investors may also be watching manufacturing data from the Fed’s Richmond region, at the same time.

What analysts are saying

“We are expecting a trading range of 1.4% to 1.10% on 10yr yields
over the next few weeks,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a daily note.

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