NEW YORK: US Treasury yields nudged higher on Tuesday, with the 10 year yield hitting its highest level in nearly five weeks as a weaker-than-forecast monthly rise in domestic durable goods orders offset pressure from government supply in Europe and the United States.
Trading volume was muted as investors remained cautious ahead of a two day meeting of the Federal Open Market Committee, the US central bank’s policy setting group.
The Fed is widely expected to leave its overnight benchmark interest rate unchanged at 0.25 percent to 0.50 percent on Wednesday amid signs that US economic growth slowed in the first quarter, but many analysts expect a rate hike at the Fed’s June policy meeting, a Reuters poll released last week showed.
In the futures market, traders don’t anticipate a US rate hike until late 2016, according to CME Group’s FedWatch program.
“It is pretty much a given that the FOMC won’t raise rates at this meeting, and may not raise rates until the end of the year,” said Kevin Giddis, head of fixed income capital markets at Raymond James in Memphis, Tennessee.
US benchmark 10-year Treasury notes slipped 3/32 in price with the yield at 1.913 percent, up 1 basis point from Monday. The 10year yield earlier on Tuesday reached 1.923 percent, its highest level since March 23, according to Reuters.
As traders await the Fed’s policy statement, due to be released at 2 p.m. EDT (1800 GMT) on Wednesday, sovereign debt supply on both sides of the Atlantic helped lift benchmark US and German yields to or close to five week highs.
The European Stability Mechanism planned to sell a new 16-year bond later on Tuesday.
The US Treasury Department will sell $34 billion in five year notes at 1 p.m. (1700 GMT) following a mediocre sale of two-year notes on Monday.
In “when issued” activity, traders expected the latest five year issue to sell at a yield of 1.389 percent , compared with a yield of 1.335 percent at the previous auction in March.
The upward yield pressure from supply was mitigated by disappointing data on US durable goods orders in March, reinforcing the view of sub par 1.0 percent annualized economic growth in the first quarter.
The Commerce Department said orders for items ranging from toasters to aircraft meant to last three years or more increased 0.8 percent last month, below a 1.8 percent gain forecast by economists in a Reuters poll.
Copyright Reuters, 2016
Courtesy : BRecorder