Treasury prices fell Monday, pushing yields off intraday lows, as traders sold government paper to make way for a raft of debt auctions this week. A key inflation reading later this week was also on investors’ radar.
The 10-year Treasury note yield TMUBMUSD10Y, -0.53% rose 1.4 basis points to 2.517%, after trading as low as 2.485%. The 2-year note TMUBMUSD02Y, +0.01% was up 1.3 basis points to 2.358%. The 30-year bond yield TMUBMUSD30Y, -0.16% ticked higher by 1.4 basis points to 2.923%. Bond prices move inversely to yields.
Investors made room for the fresh wave of supply this week during the so-called “concession” process, when broker-dealers push yields higher in an effort to ensure a successful showing in coming bond auctions, said market participants. The U.S. Treasury is set to sell $78 billion of government paper, across 3-year, 10-year and 30-year maturities.
“It’s a concession being built ahead of the auctions,” Subadra Rajappa, head of U.S. rates strategy at Société Générale, told MarketWatch.
In economic data, February’s factory orders fell 0.5% in February, the fourth time in five months. But the key highlight of the week will be March’s consumer-price index data that could indicate if inflation growth is bottoming out. Inflation is anathema to bonds because it can chip away at the fixed value of owning government paper.
Elsewhere, jitters from Libya put investors on edge as civil war threatened to break out again in the country. The U.S. military said it would pull its military forces, which has been stationed in the country to combat Islamic State. The unrest has crimped oil production, lifting crude prices.
See: Oil taps fresh 5-month highs amid Chinese buying, Libyan conflict
In Europe, U.K. Prime Minister Theresa May was attempting to gather support among the European Union for an extension of Brexit.
Japanese bond yields retreated after the Bank of Japan cut its assessment for several economic regions as the global growth slowdown weighed on its manufacturing and export industries. The 10-year Japanese government bond yield TMBMKJP-10Y, +0.00% fell 1.6 basis points to negative 0.05%.
“What’s keeping bond markets from selling off is the gravitational pull from overseas. There’s still a lot of economic uncertainty abroad, and that’s going to anchor Treasury yields,” said Rajappa.
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