U.S Treasury yields edged higher Tuesday as the S&P 500 and Nasdaq Composite indexes extended their climbs 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,
1.284%

1.276%, 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,
1.906%

was yielding 1.896%, compared with 1.872% on Monday.

What’s driving the market?

U.S. stocks traded higher Tuesday, with the S&P 500 Index
SPX,
+0.13%

and Nasdaq Composite Index
COMP,
+0.36%

both on track for record finishes as bulls continued to find fuel in the U.S. Food and Drug Administration’s approval of the first COVID-19 vaccine on Monday.

The move in equities extended the gradual increase of appetite for risk that had been weighing on government debt ahead of the annual Jackson Hole central bankers symposium this week. Federal Reserve Chairman Jerome Powell is the featured speaker on Friday morning.

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, along with 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.

On the U.S. economic front, sales of new homes in the U.S. rebounded in July after three consecutive months of declines. New-home sales increased 1% to an annual rate of 708,000, the government said Tuesday. 

Looking ahead, investors will be watching for appetite for a sale of $60 billion short-term bonds that could influence trading in 2-year notes.

What analysts are saying

“Supply commences this afternoon with the August offering of $60 bn 2-year notes as the market’s attention remains trained on Jackson for any insights on the path of monetary policy.” BMO Capital Markets strategists Ben Jeffery and Ian Lyngen wrote in a note. “While we are apprehensive there will be anything paradigm-shifting offered from the Chair, the event risk is nonetheless something to consider in evaluating the sponsorship that meets 2s.”

“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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