BOND REPORT: Treasury Yields Continue Climb As Fed Prepares To Meet

By Sunny Oh Features Dow Jones Newswires

Investors anticipate Treasury to issue longer-dated debt

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Treasury prices slipped, pushing up yields, on Tuesday, a day after Treasury Secretary Steven Mnuchin reiterated the possibility of issuing ultralong bonds.

The Federal Reserve's policy-making committee, meanwhile, is set to begin a two-day meeting later Tuesday.

Yields for the 10-year Treasury note gained 2.1 basis points to 2.334%, pushing above 2.320%, a chart resistance level that could lead to further selling. Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.

Yields for the 2-year note moved up 1.2 basis point to 1.290%, while the 30-year bonds rose 1.6 basis point to 3.019%.

The Treasury yield curve, a line plotting yields across maturities of U.S. government bonds, has steepened amid growing speculation that the Treasury Department is considering issuing ultralong bonds to fund the White House's proposed infrastructure bill after Mnuchin said on Monday that such an idea "made sense".

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Analysts also said it could ramp up issuance of 10-year notes and 30-year bonds for the same purpose during the refunding announcements set for Wednesday. An additional supply of ultralong bonds with a maturity of more than 30 years would steepen the yield curve by pushing prices of longer-dated bonds, and yields higher.

See: Does the market have the appetite for ultralong bonds? Treasury wants to know (http://www.marketwatch.com/story/does-the-market-have-the-appetite-for-ultra-long-bonds-treasury-wants-to-know-2017-04-19)

Officials from the Federal Open Market Committee were set to begin a two-day meeting on Tuesday. They will announce their decision Wednesday (http://www.marketwatch.com/story/fed-to-signal-rate-hike-plan-in-place-despite-soft-economic-data-2017-04-27), but it is widely expected they will hold the federal-funds rate, the cost to borrow money overnight from the central bank, steady.

See: Six things to watch for in the Fed's policy statement (http://www.marketwatch.com/story/six-things-to-watch-for-in-the-feds-policy-statement-2017-05-02)

Traders will also pay attention to the ADP national employment report on Wednesday, which could give a gauge of April's nonfarm payrolls numbers, a closely watched employment indicator. The two numbers have been closely linked in the past, but their correlation has faded recently.

(END) Dow Jones Newswires

May 02, 2017 09:34 ET (13:34 GMT)