Bond Report: 10-year Treasury yield trades above 3.10% ahead of Fed decision
Treasury prices extended a weakening trend Tuesday, pushing the 10-year note yield above 3.10% a day ahead of a Fed decision that is expected to deliver the third rate increase of 2018.
Read: Here’s what bond traders will be watching when the Fed makes its rate decision
The yield on the benchmark 10-year Treasury TMUBMUSD10Y, +0.24% rose 2.4 basis points to end at 3.102%, its highest finish since May 17, when it logged an intraday high near 3.13%. The 2-year yield TMUBMUSD02Y, +0.06% rose 3.1 basis points to 2.843%, its highest since June 2008, while the 30-year Treasury bond yield TMUBMUSD30Y, -0.03% ticked up 2.4 basis points to 3.233%. Yields and debt prices move in opposite directions.
“The U.S. 10-year yield seems to be gearing up for an attack on this year’s high around 3.13%,” wrote analysts at KBC Bank, in a note.
The yield rise comes ahead of the conclusion of a two-day meeting of Fed policy makers on Wednesday that is seen as virtually certain to deliver a quarter-point rate increase, bringing the fed-funds rate to a range of 2% to 2.25%. Investors will focus on the Fed’s policy statement, forecasts and, in particular, remarks by Fed Chairman Jerome Powell in his news conference.
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Treasury traders also dealt with another round of supply as the government sold $ 38 billion in five-year notes TMUBMUSD05Y, +0.30% The sale attracted relatively soft bidding, analysts said.
On the data front, the Conference Board’s September consumer confidence index climbed to an 18-year high at 138.4 from a revised 134.7 in August.
Earlier, the S&P CoreLogic Case-Shiller 20-city housing price index rose 0.1% in July and was up 5.9% compared to a year ago., while a September reading on consumer confidence is set to be released at 10 a.m.
Stocks put in a mixed performance a day after an apparent intensification of trade tensions, with the implementation of additional tariffs by the U.S. on Chinese goods and the threat of retaliatory tariffs by China on U.S. goods and the cancellation of negotiations, weighed on the market.
Knee-jerk reactions aside, stocks have largely brushed off trade worries in 2017, with the Dow Jones Industrial Average DJIA, -0.26% and the S&P 500 index SPX, -0.13% trading at records last week.