U.S. Treasury yields climbed on Monday as so-call risk assets, including stocks and oil, drew bidders and the dollar ticked slightly higher.
The 10-year Treasury note TMUBMUSD10Y, -0.05% was up 1.4 basis point at 2.171%, compared with 2.157% late Friday in New York. The two-year note TMUBMUSD02Y, -1.50% gained 1.3 basis points at 1.319%, while the 30-year Treasury bond TMUBMUSD30Y, -0.37% known as the long bond, rose 0.7 basis point to 2.789%, compared with 2.782% on Friday.
A dearth of significant economic news following a week focused on the Federal Reserve’s decision last Wednesday to raise interest rates to a range between 1% and 1.25%, while laying out the groundwork for unwinding its $4.5 trillion balance sheet, kept yields adrift in early trade.
Lingering questions about sluggish inflation, which can erode a bond’s fixed payments, has helped to mostly put some downward pressure on yields, which move inversely to prices lower, despite the hawkish monetary-policy stance maintained by the Federal Open Market Committee and Fed Chairwoman Janet Yellen, who described signs of weak inflation and economic growth as “one-off.”
“The FOMC statement and Janet Yellen’s press conference conveyed a tone of discounting the recent bad inflation numbers and also talked about reducing balance sheet $300 [billion] in the first year,” wrote David Shiau, Treasury trader at Jeffries LLC, in a note.
Shiau said the much more aggressive pace of balance-sheet reductions by the Fed might not be received well by the market, given recent trade that shows investors are betting on a weaker economic environment.
“The issue of normalization of the composition of the balance sheet also remains very vague and has not been addressed with any specificity by Fed officials,” he wrote.
Meanwhile, the Dow Jones Industrial Average DJIA, +0.37% and the S&P 500 index SPX, +0.49% were set to trade higher, scoring a boost from the energy sector XLE, -0.23% and a modest gain in crude-oil futures CLN7, +0.31% The dollar also was rising slightly, as measured by the ICE U.S. Dollar Index DXY, +0.20% up 0.1% at 97.2960.
Among, Fed speakers, New York Fed President William Dudley appeared upbeat speaking at a business roundtable discussion in Plattsburgh, N.Y., where he described the economic outlook as “pretty good.”
Looking ahead, the U.S. Treasury Department will auction $97 billion in securities this week, comprising $53 billion in new debt and $44 billion in previously sold debt.
In Europe, the German 10-year Treasury note TMBMKDE-10Y, +4.72% known as the bund, was at 0.29%. Lower yields throughout Europe, compared with their U.S. counterpart, also has helped to stoke appetite for U.S. sovereign paper, pressuring yields lower.