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U.S. Treasury yields were steady Tuesday as investors eyed a Federal Reserve meeting that could offer clues on how central bank officials are interpreting the recent rise in inflation expectations.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.042% was flat at 1.039%, while the 2-year note rate TMUBMUSD02Y, 0.121% was down 0.2 basis point to 0.123%. The 30-year bond yield TMUBMUSD30Y, 1.801% added 0.3 basis points to 1.801%.
What’s driving Treasurys?
The Federal Reserve convened on Tuesday for their latest policy meeting. Investors aren’t expecting significant decisions out of the meeting, but will listen carefully how Fed policymakers will judge the recent rise in expectations for economic growth and inflation sparked by the possibility of more fiscal relief under a Democratic-controlled White House and Congress.
Analysts are also eyeing whether the Fed will continue to push back on speculation the central bank will taper its asset purchases earlier than forecast.
See: Think higher inflation is coming? The Fed will believe it when it sees it
Former Federal Reserve Chair Janet Yellen was confirmed as U.S. Treasury Secretary by the Senate on Monday.
In U.S. economic data, the S&P Case-Shiller home price index rose 9.5% year-over-year. Meanwhile, the Conference Board’s gauge of consumer confidence in January rose 2.1 points to January.
The International Monetary Fund raised its forecast for global economic growth for this year but warned that there was still “extraordinary uncertainty” about the outlook.
Also, an auction for $61 billion of 5-year notes drew solid demand. Following a sharp bond-market selloff earlier in January, investors have shown increased interest in buying government debt at more attractive yields.
What did market participants say?
“Markets currently expect the Fed to maintain the current pace of QE through the end of the year and then taper, but these expectations are fragile and the Fed does not have a good track record of managing” expectations around its quantitative easing program, said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments.
