U.S. Treasury Department yields entered Wednesday higher ahead of consumer price index data for February and an auction for 10-year benchmark pounds, which could both affect trade in government paper.
What do Treasurys do?
Yield of 10-year financial note TMUBMUSD10Y,
rose 1.7 basis points to 1.561%, while the 2-year note rate was TMUBMUSD02Y,
it was down 0.2 basis point to 0.165%. Yield 30-year bonds TMUBMUSD30Y,
gained 1.8 basis points to 2.277%.
What drives Treasurys?
A February reading of consumer prices at 8:30 am ET could signal the pressure of inflation on the economy. Economists expect it to show a 0.4% rise after a 0.3% rise in January. Core CPI is seen rising up 1.7% from 1.4% per annum. Core CPI, which eliminates volatile food and energy prices, is expected to rise 0.1% after a flat reading in January.
Investors have fretted the entire $ 1.9 trillion incentive bill going through Congress that could add to the wave of consumer spending expected once the pandemic comes under control later this year. The OECD said this week that President Biden’s coronavirus aid package will contribute around one percentage point to global economic growth in 2021 and revised America’s growth rate up to 6.5% from 3.2%. Morgan Stanley raised its 2021 forecast for U.S. economic growth to 7.3% from 6.5%, a pace not achieved since the rise of the Korean War.
With four days until additional unemployment benefits begin to run out, the House will take the final vote on a coronavirus relief bill Wednesday, clearing the way for the President to sign the stimulus package and delivering another round of economic support to U.S. households, small businesses. and town governments.
See: Blind investors with too much optimism over vaccine spreads must see these risks, warns economist
Also drawing focus, the U.S. Treasury Department will sell $ 38 billion of 10-year pounds later this afternoon. Demand for this batch of Treasurys is expected to be strong, but traders will be looking for signs of a lack of interest.
Two weeks ago, a 7-year note auction accelerated bad bond market sales that brought the 10-year note to 1.60% for the first time this year.
Read: This week ‘s financial auction could add to bond market turmoil
What did market participants say?
The 10-year note fair will “play a key stage role in determining whether the recent pullback in U.S. output represents a reassessment of fair value or a temporary break on a sustained bearish move, ”Said investigators at Rabobank.