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U.S. Treasury yields fell Monday as investors geared up for this week’s Federal Reserve meeting that could see bond traders pitted against the U.S. central bank.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.610% fell 2.5 basis points to 1.609%, after hitting its highest levels in a year on Friday, while the 2-year note rate TMUBMUSD02Y, 0.149% was flat at 0.151%. The 30-year bond yield TMUBMUSD30Y, 2.359% slid 3.1 basis points to 2.370%. Yields and prices move in opposite directions.
What’s driving Treasurys?
Investors remain focused on the Federal Reserve’s meeting this week, where investors will watch for policy makers to offer any new thoughts on a sharp rise in long-term bond yields this year. Some are hoping the Fed will carry out measures to ease pressure on the Treasury market, including an extension of exemptions to the supplementary leverage ratio.
Read: Here’s why bond investors are calling for the Fed to give banks relief on capital rules
But analysts warned the Fed is likely to stand pat until higher government bond rates started to weigh on equity and corporate bond prices, and thus undoing the efforts by the central bank to loosen financial conditions.
See: Markets set up for disappointment from Fed meeting as bond yields renew rise
The Empire State manufacturing index increased to 17.4 in March from 12.1 in February, with the report also pointing to inflationary pressures as the prices paid component jumped to its highest reading since 2011.
Economic data could add some catalysts for trading later this week, with retail sales from February due on Tuesday.
U.S. Treasury Secretary Janet Yellen said the stimulus bill signed last week would help generate inflation, but that it was unlikely to last.
What did market participants say?
“Rate volatility has caused discomfort in the markets, but it’s difficult to sense any fallout yet in the real economy. Instead, the global economy is having a harder time dealing with the pandemic right now than higher rates that have followed the expectation the pandemic will not be a factor in 2022,” said Jim Vogel, an interest-rate strategist at FHN Financial.
