Yields for the 10 and 30-year U.S. Treasurys hit their lowest in at least three months Tuesday, ahead of policy meetings of the European Central Bank on Thursday and the Federal Reserve next week.
A report from CNBC said the U.S. central bank may begin to discuss tapering at its coming gathering, setting the table for an eventual rollback of its $120 billion-a-month asset-purchase program.
How Treasurys are performing
The 10-year Treasury yield hit its lowest level since March 11, while the long bond touched its lowest rate since Feb. 26, according to data compiled by Dow Jones Market Data.
Fixed-income drivers
U.S. Treasuries have been trading in a narrow range since April and but yields have been tilting lower ahead of inflation data due on Thursday that could offer more clarity on the path of inflation as the economy picks up after the COVID pandemic,
Equities also have seen rangebound trading in recent weeks, hovering near record highs amid effective vaccine rollouts and the easing of lockdown protocols.
The moves suggests that fixed-income investors are sidestepping concerns about inflation, which is viewed as a major factor in Treasurys because inflation can erode a bond’s fixed value.
The release Thursday of the U.S. May consumer-price index is shaping up to be the main data event of the week. A hotter-than-expected read on the April CPI, which rose 4.2% year over year, temporarily rattled markets last month.
CNBC reported that the Federal Open Market Committee may discuss tapering of bond buying next week, with an eye toward commencing reductions in the FOMC’s asset portfolio at the end of 2021 or early next year.
In U.S. economic data on Tuesday, job openings in the U.S. soared to 9.3 million in April from a revised 8.3 million in the prior month, the Labor Department said. The data underlines concerns about employers inability to fill jobs despite unemployment that remains high as a result of the COVID-19 pandemic.
Elsewhere, April data released Tuesday morning showed the U.S. international trade deficit narrowed to $68.9 billion from a record $75 billion a month earlier. Economists surveyed by Dow Jones Newswires and The Wall Street Journal had looked for a consensus $69 billion gap.
A closely followed U.S. small-business index fell slightly in May, coming in 0.2 point lower at 99.6, to mark the first decline of the year, according to the National Federation of Independent Business.
What strategists are saying
DWS Group expects the yield on the 10-year Treasury note will rise to 2% over the next 12 months, according to the asset manager’s midyear outlook presentation.