Bond Report: 10-year Treasury yield’s move above 0.70% is short-lived after strong debt auction


Long-dated U.S. Treasury yields trimmed their rise Wednesday after market participants showed strong appetite for a record-large debt auction, affirming the bond market’s ability to shrug off the waves of new supply.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.680% rose 0.6 basis points to 0.686%, after rising as high as 0.721%, while the two-year note rate TMUBMUSD02Y, 0.152% stood pat at 0.154%. The 30-year bond yield TMUBMUSD30Y, 1.401% climbed 2 basis points to 1.406%. Bond prices move inversely to yields.

What’s driving Treasurys?

Debt auctions held across the world from major developed economies, including Australia and Germany, added to the pressure to global bond markets early in the day, as traders struggled to take down the rush of supply.

But much of that bearish momentum vanished after investors showed strong demand for the $51 billion sale of five-year Treasurys notes, which hadall been held down by the Federal Reserve’s clear commitment to keep its benchmark interest rate near zero for a long time.

In economic reports, durable goods orders for July jumped 11.2%, much higher than the consensus forecast of a 4.8% increase, but much of the rise was driven by higher auto sales.

Investors are now turning their attention to the Federal Reserve’s policy review announcement on Thursday, where it’s expected to switch to a policy of allowing temporary overshoots of inflation before contemplating tighter monetary policy.

Read: Powell in Jackson Hole speech will put out Fed’s welcome mat for hot labor markets and inflation overshoots

What did market participants say?

“There’s still a lot of demand for Treasurys. Supply matters, but it only matters so much,” said Tom Graff, head of fixed income at Brown Advisory, in an interview.

Leave A Reply

Your email address will not be published.