US Treasury yields struggle to move as market absorbs 3-year auctions

Yields on U.S. Treasuries were flat on Tuesday after a short-term government bond auction saw a strong bid.

What do the Treasures do?

The yield of the 10-year Treasury bill TMUBMUSD10Y,
declined 0.3 basis points to 1.156%, while the rate on the 2-year TMUBMUSD02Y note,
rose 0.6 basis points to 0.117%. The 30-year bond yield TMUBMUSD30Y,
gained 0.4 basis point to 1.947%.

Bond yields fall as prices rise, and vice versa.

What motivates Les Trésors?

The US Treasury Department has attracted strong demand for an auction of $ 58 billion 3-year notes. While new issues may weigh on government bond values, the recent surge in bond yields should help markets absorb the fresh supply without suffering from indigestion.

Still, bond traders suggest that the larger sell-off in 10-year bonds and 30-year debt on Wednesday and Thursday could boost trade and potentially push up long-term Treasury yields.

Investors are also closely watching the debate around a new U.S. tax relief plan amid growing complaints from some economists that the proposed size of the bill is too large.

President Joe Biden said on Tuesday he supported a proposal by House Democrats that would send $ 1,400 stimulus checks to Americans earning up to $ 75,000 a year. His comments came after a meeting with some of America’s top executives including Jamie Dimon of JP Morgan Chase.

In economic data, close monitoring The U.S. Small Business Optimism Index compiled by the National Federation of Independent Businesses fell from 0.9 in January to 95.0, reaching the lowest level since the start of the pandemic.

Department of Labor Job Opportunities and Workforce Turnover Survey reported hiring fell from nearly 400,000 in December to 5.5 million.

What did market players say?

“Wednesday promises to be the pivotal day of a defining week for the Treasury market as the influence of the CPI, supply and Powell reignites hopes of another run to 1.25%” for the 10-year note, wrote Ian Lyngen, head of US rate strategy. at BMO Capital Markets.

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