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U.S. Treasury yields saw a slight pullback on Tuesday, kicking off a holiday-shortened week, as investors tuned into a confirmation hearing for former Fed Chairwoman Janet Yellen as Treasury Secretary.
In her testimony, Yellen called for more fiscal spending to avoid economic scarring and a protracted downturn.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.088% fell 0.5 basis point to 1.092%, while the 2-year note TMUBMUSD02Y, 0.145% edged 0.6 basis point lower to 0.131%. The 30-year bond yield TMUBMUSD30Y, 1.836% declined 1.3 basis points to 1.839%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Yellen said she was open to more fiscal spending to help offset the economic carnage of the pandemic, particularly as interest rates remain at historic lows. At the same time, she acknowledged concerns around excessive deficits, but said it was important to recover from the pandemic first.
Live Blog: Yellen champions Biden’s economic plan at confirmation hearing: live blog
Investors have been eyeing the Biden administration’s willingness to deploy additional funds to bridge the economy, a move that could boost inflation expectations and lift debt issuance.
Biden, who is set to be inaugurated in less than 24 hours, said recently that he was open to deficit financing to help see the economy through its current public-health crisis.
There was no economic data on Tuesday, though traders would obtain a glimpse of foreign investor activity in the U.S. Treasurys market through the Treasury International Capital report due at 4 p.m.
What did market participants say?
“Soon to be Treasury Secretary Yellen will be a staunch supporter of more spending. Like Fed Governor Brainard, she believes in the K-shape recovery, and will fight very hard to lift up those most impacted by the pandemic,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.
