Bond Report: Treasury yields stays steady as investors wait for Fed meeting to kick off

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U.S. Treasury yields held steady on early Tuesday’s trade as traders waited for the Federal Reserve to begin its two-day meeting, where the central bank may offer clues on how monetary policy might evolve in the coming months.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.594% was at 0.607%, while the 2-year note rate TMUBMUSD02Y, 0.144% fell 0.9 basis point to 0.147%. The 30-year bond TMUBMUSD30Y, 1.229% edged 0.3 basis point up to 1.255%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

The Fed is set to begin its two-day proceedings. Though, the central bank is not expected to make any tweaks to its benchmark interest rate, Fed Chairman Jerome Powell could offer guidance on monetary policy at the post-meeting press conference as the economic recovery stalls due to rising coronavirus cases in several U.S. states and the reinstatement of lockdown measures to combat the disease’s spread.

See: Fed won’t be happy with how the economy is performing, but is not perturbed enough for aggressive action

The Senate outlined their fiscal stimulus proposal on Monday. Divisions between Democrats and Republicans over the extension of unemployment benefits and other issues could stymie negotiations in Congress, amid worries a delay to a bill could hit consumers as their hopes for an economic rebound dissipate.

In U.S. economic data, the Case-Shiller national home price index for May is due at 9 a.m. ET, followed by the Conference Board’s consumer confidence reading in July.

What did market participants’ say?

“The longer it takes for Congress to agree a package that extends the virus stimulus, the more pessimistic households will turn on the outlook. Two weeks remain for lawmakers to negotiate an agreement before the start of the summer recess. Delay is adding fuel to the flattening in core bond yields,” said Kenneth Broux, a strategist at Société Générale, referring to how the gap between short-term and longer-term debt yields had narrowed to reflect growing economic pessimism among bond traders.

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