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U.S. Treasury yields declined slightly in early Tuesday trade before a debt auction is expected to highlight the U.S. government’s ultra-low borrowing costs as the economy recovers from the coronavirus crisis.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.673% fell 1.1 basis point to 0.673%, while the 2-year note rate TMUBMUSD02Y, 0.160% was flat at 0.161%. The 30-year bond TMUBMUSD30Y, 1.427% slipped 1.8 basis points to 1.424%.
What’s driving Treasurys?
The Treasury Department will auction off $46 billion of 3-year notes on Tuesday at 1 p.m. ET, which is expected to sell at the lowest yield in the maturity’s history.
At the same time, short-end rates are likely to stay anchored at depressed levels amid expectations for the Federal Reserve to keep interest rates at zero for several years as the central bank looks to spur inflation pressures and bolster employment.
Atlanta Federal Reserve President Raphael Bostic said that the U.S. economic recovery was bumpier than he had expected. He also noted economic activity was plateauing in some areas of the country where the coronavirus was seeing a resurgence.
San Francisco Fed President Mary Daly and Boston Fed President Thomas Barkin will also speak on Tuesday.
Investors will handle some second-tier economic data. The U.S. Labor Department will release its job openings and labor turnover survey for May at 10 a.m.
What did market participants’ say?
“Overall, the front-end of the Treasury curve should remain well anchored as the Fed remains on hold for the foreseeable future,” said Justin Lederer, Treasury market analyst at Cantor Fitzgerald.
