Treasury yields rose on Tuesday as investors waited for the Federal Reserve to begin its April policy meeting, where a rate increase is not expected.
What are Treasurys doing?
The 10-year Treasury note yield was up 1.9 basis points to 2.955%, while the 2-year note yield rose slightly 0.8 basis points to 2.496%. The 30-year bond yield picked up 2.3 basis point to 3.119%, according to Tradeweb data.
Bond prices move in the opposite direction of yields.
What are Treasurys doing?
With month-end buying out of the way, the bond market returned to its bearish tone amid swirling concerns over a deluge of supply, strengthening inflation pressures and excessive government debt. PCE inflation, the Fed’s preferred inflation gauge, has returned to 2%, raising the risk that the central bank would carry out three further rate hikes this year.
Treasury Secretary Steven Mnuchin, speaking at the Milken Institute’s annual conference, reiterated that he was not worried about China selling U.S. debt as retaliation in a trade war. Like before, he said the U.S. had plenty of buyers for its government paper. Economists are looking forward to the May refunding on Wednesday, when changes to the size of the bond auctions will be announced.
Investors were also preparing for a two-day Fed meeting set to commence Tuesday. Analysts say few changes will be made to the policy statement but still insist the buildup of inflationary pressures make a June rate increase all but certain.
What did market participants say?
“We expect the tone of the FOMC statement to be little changed this week, with officials continuing to signal ‘gradual’ tightening ahead. Officials will likely once again state that they expect inflation ‘to stabilize around the Committee’s 2% objective over the medium term.’ Nor do we expect the slowing in GDP in Q1 to lead to any significant change of tone on growth relative to the last statement,” said Jim O’ Sullivan, chief U.S. economist for High Frequency Economics.
What else is on investors’ radar?
Traders will look ahead to a raft of morning data. The ISM manufacturing index for April will come in at 10 a.m. Eastern. Economists polled by Econoday are forecasting a reading of 58.6, from a reading of 59.3 in March. Any number above 50 suggests the manufacturing sector is still growing.
How are other assets performing?
The 10-year German government bond yield was down 0.4 basis point to 0.562%, according to Tradeweb data. German bonds are seen as a proxy for the eurozone’s economic viability but also a haven asset that trades akin to U.S. Treasurys.