U.S. Treasury yields rose on early Monday’s trade before a key auction for short-term debt that could influence the direction of trading for the rest of the session.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.129% was up 2.4 basis points to 1.131%, after posting its biggest weekly rise since June last week, while the 2-year note rate TMUBMUSD02Y, 0.140% edged 0.2 basis point higher to 0.139%. The 30-year bond yield TMUBMUSD30Y, 1.887% climbed 3 basis points to 1.893%. Yields and debt prices move in opposite directions.
What’s driving Treasurys?
U.S. bonds were on track to extend last week’s selloff when the 10-year note yield rose close to 20 basis points.
The bond market has come under sustained pressure in January amid fears a Democratic-controlled Congress could further ease fiscal policy, providing support to a pandemic-battered economy and lifting inflation expectations.
Beyond fiscal concerns, investors were eyeing new debt supply that could temporarily lift government bond yields. The Treasury Department will sell $58 billion of 3-year notes in the afternoon, the first of four sales for coupon-bearing Treasurys this week.
Ahead of auctions, primary dealers will try to bid up yields higher to ensure a successful sale and limit the share of bonds sold to them at the auction. As part of their obligations, primary dealers have to put in bids at every Treasury sale.
At the same time, the recent surge in bond yields could draw in bargain-seeking investors who want to lock in higher rates.
What did market participants say?
Markets will absorb “long end Treasury supply which appears poised to price at some of the most attractive yield levels in quite some time,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.