Stock Market

10-year Treasury yield pops back above 0.60% as traders brace for key bond auction

U.S. Treasury yields climbed on early Tuesday’s trade as investors prepared for the first of three key bond auctions this week and handled some vaccine developments.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.632%

rose 3.4 basis points to 0.608%, while the 2-year note rate
TMUBMUSD02Y,
0.148%

edged 1.2 basis point higher to 0.143%. The 30-year bond yield
TMUBMUSD30Y,
1.320%

surged 3.9 basis points to 1.286%.

What’s driving Treasurys?

The U.S. Treasury Department will sell $48 billion of 3-year notes on Tuesday afternoon. The auction is $10 billion larger than when the U.S. Treasury first started increased the size of their debt sales back in April to finance the response to the COVID-19 pandemic.

As part of the concession process, traders will temporarily push yields higher to make them more attractive at purchase ahead of the auction.

Investors handled some news on the medical front after Russia announced it had approved the world’s first vaccine against the coronavirus, but questions around its safety remained.

Some data also added to pressure on the bond market, which has been on the backfoot in the past few days. U.S. producer prices jumped by an unexpected 0.6% in July, well above the 0.3% forecast from MarketWatch-polled economists, allaying concerns that the U.S. was at the risk of succumbing to deflationary pressures.

What did market participants’ say?

“Despite the increased supply of Treasuries, we expect auction demand will remain strong as precautionary savings maintain the investment fund bid, while rate differentials and dollar expectations support foreign demand,” said John Canavan, lead analyst at Oxford Economics.

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