Bond Report: Treasury yields hold steady with Fed meeting set to kick off

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U.S. Treasury yields were seeing subdued trading on Tuesday, as fixed-income investors awaited a fresh round of data on retail sales and inflation and the start of the Federal Open Market Committee’s two-day policy meeting, which could provide a clearer picture of the central bank’s view on the economy and inflation outlook.

How Treasurys are performing
  • The 10-year Treasury note yield
    TMUBMUSD10Y,
    1.496%

    was at 1.500%, versus 1.499% on Monday at 3 p.m. Eastern Time. Yields rise as prices fall, and vice vesa.

  • The 30-year Treasury
    TMUBMUSD30Y,
    2.195%
    ,
    known as the long bond, was at 2.188%, compared with 2.189% a day ago.

  • The 2-year Treasury note
    TMUBMUSD02Y,
    0.165%

    was yielding 0.149%, versus 0.159% on Monday.

On Monday, the 2-year Treasury note hit its highest level since May 13, according to Dow Jones Market Data.

Today’s fixed-income drivers

Treasury investors have inflation on the brain but thoughts of rising pricing pressures may not recede until the conclusion of the rate-setting FOMC’s policy meeting at 2 p.m. Eastern Time Wednesday, followed by a 2:30 p.m. press conference with Fec Chair Powell.

Before that investors will pore over data including retail sales for May and a reading of inflation on May’s producer-price index at 8:30 a.m. Eastern Time. A report on manufacturing activity in the New York state area also is due at the same time.

A report on U.S. industrial production is due at 9:15 a.m. ET. The National Association of Home Builders’ housing market index for June is due out at 10 a.m., at the same time as data on business inventories for April.

Later in the session, investors will watch for a $24 billion auction of 20-year Treasurys
TMUBMUSD20Y,
2.116%
.

What strategists are saying

“If we had a $1 for every time we heard a Fed member say they want to run things hot. The problem with that approach is it eventually flames out or the analogy I’ve given, when wanting to drive 200 mph in a 55 an accident was bound to happen,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a Tuesday research note.

“Thus, this policy eventually becomes the architect of its own demise in terms of effectiveness. Well, the most interest rate sensitive part of the market, that being housing, has hit a wall and is now burning out (mortgage apps to purchase a home is at the lowest in 13 months),” he wrote.

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