U.S. Treasury yields inch higher ahead of Fed meeting

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U.S. Treasury yields rose slightly in early Tuesday as investors eyed a Federal Reserve meeting that could offer clues on how central bank officials are interpreting the recent rise in inflation expectations.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.047%

rose 0.8 basis point to 1.048%, while the 2-year note rate
TMUBMUSD02Y,
0.125%

was down 0.4 basis point to 0.123%. The 30-year bond yield
TMUBMUSD30Y,
1.805%

added 1.1 basis points to 1.810%.

What’s driving Treasurys?

The Federal Reserve will convene on Tuesday for their latest policy meeting. Investors aren’t expecting significant decisions out of the meeting, but will listen carefully how Fed policymakers will judge the recent rise in expectations for economic growth and inflation sparked by the possibility of more fiscal relief under a Democratic-controlled White House and Congress.

See: Think higher inflation is coming? The Fed will believe it when it sees it

Former Federal Reserve Chair Janet Yellen was confirmed as U.S. Treasury Secretary by the Senate on Monday.

In U.S. economic data, the S&P Case-Shiller home price index for November is due at 9 a.m. ET, followed by a gauge of consumer confidence for January at 10 a.m.

Also, an auction for $61 billion of 5-year notes will test appetite for Treasurys. Following a sharp bond-market selloff earlier in January, investors have shown increased interest in buying government debt at more attractive yields.

What did market participants say?

Tuesday’s Fed meeting will be the key focus for investors, “with Chair Powell having recently maintained his support for continued accommodative policies while other officials have started discussing timing for exit,” said Simon Deeley, a rates strategist at RBC Dominion Securities.



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