Bond Report: 10-year Treasury yield bumps up against ceiling of two-month range as supply weighs on trading

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U.S. long-dated Treasury yields rose in early Wednesday’s trade, with the benchmark maturity butting against the top of its recent trading range as market participants made room for new debt issuance from the U.S. and other major bond markets.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.706% rose 2.8 basis points to 0.710%, while the 2-year note rate TMUBMUSD02Y, 0.144% stood pat at 0.156%. The 30-year bond yield TMUBMUSD30Y, 1.422% climbed 3.6 basis points to 1.423%. Bond prices move inversely to yields.

What’s driving Treasurys?

Debt auctions held across the world from major developed economies including Australia and Germany added to the pressure to global bond markets, as traders struggled to take down the rush of supply.

In the U.S., investors were gearing up for a $51 billion sale of 5-year notes that could give an indication of appetite for short-dated government paper, which has been held down by the Federal Reserve’s clear commitment to keep its benchmark interest rate near zero for a long time.

In economic reports, durable goods orders for July jumped 11.2%, much higher than the consensus forecast of a 4.8% increase, but much of the rise was driven by higher auto sales.

Some members of the Fed’s rate-setting committee will speak on Wednesday, including Richmond Fed President Thomas Barkin and San Francisco Fed President Mary Daly.

What did market participants’ say?

“Caution ahead of tomorrow’s Jackson Hole address by Fed Chair Jerome Powell likely informs this wary tone” in risk assets, said analysts at Rabobank.

“Safe haven bonds, however, remain under some pressure with supply again the likely driver,” the researchers added.

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