Bond Report: 30-year Treasury yield back at three-week high as global stocks extend gains

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U.S. Treasury yields rose Tuesday as the positive tone in equities markets helped sap demand for safe-haven government bonds.

What did Treasurys do?

The 10-year Treasury note yield TMUBMUSD10Y, 1.104% rose 2.8 basis points to 1.105%, highest since Jan. 21, while the 2-year note rate TMUBMUSD02Y, 0.121% edged up 0.4 basis point to 0.115%. The 30-year bond yield TMUBMUSD30Y, 1.871% climbed 3.1 basis points to 1.877%.

The rise in longer-term yields helped steepen the yield curve, with the spread between the 2-year and 10-year widening to 99 basis points, its biggest gap in three weeks.

What drove Treasurys?

Investors were encouraged by news on the pace of vaccination efforts in the U.S. and the prospect of more fiscal aid from Congress, offering the prospect of a boost to economic recovery. This, in turn, weighed on values for Treasurys, pushing yields higher.

U.S. stocks extended their gains on Tuesday, recovering most of their losses from last week. The S&P 500SPX was up over 3%.

Discussions between Senate Republicans and the Biden administration on the size of a new pandemic relief package were in focus.

House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer said they would to move towards budget reconciliation this week, which would allow Democrats to overcome the Senate’s 60-vote requirement.

This helped to ease concerns around the lack of Republican support for Biden’s proposal and raised the possibility Washington could end up passing a much larger package of $1.9 billion instead of a watered-down bill.

What did market participants say?

“Whilst we do not see much new drivers to add momentum to the move higher in rates specifically today, the tone in global market strikes as us as more upbeat than last week,” said Padhraic Garvey, regional head of research of the Americas at ING.

Read: U.S. Treasury market reloads bets on reflation

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