MW: Treasury yields tick higher as investors await Fed
By William L. Watts, MarketWatch
NEW YORK (MarketWatch) — U.S. Treasurys drifted marginally lower Wednesday, allowing yields to tick higher for the first time in four sessions after U.S. lawmakers struck a two-year budget deal that could avert another government shutdown.
Investors also continued to await next week’s meeting of Federal Reserve policy makers.
The yield on the 10-year Treasury note 10_YEAR +0.54% rose 1.2 basis points to 2.819%. Yields rise as bond prices decline.
House and Senate negotiators late Tuesday reached a deal to set spending levels for the next two years and replace some automatic budget cuts.
“Does it matter? The deal will still need to be agreed by party members, but although tapering is priced in and the ‘tapering isn’t tightening’ message has been understood by markets, maybe the dip in U.S. yields we’ve seen over the last few days is now over,” said Kit Juckes, strategist at Société Générale, in a note. Investors want to ‘rotate’ out of bonds into stuff that is more exciting as economic headwinds fade,” he said.
At the short end of the curve, the two-year note yield 2_YEAR +1.99% rose less than half a basis point to 0.306%, while at the long end, the 30-year Treasury bond yield 30_YEAR +0.31% rose 1 basis point to 3.852%.
Yields dropped for three consecutive sessions after last Friday’s November jobs report proved more robust than expected. Analysts said the drop showed investors had already factored in expectations the Federal Reserve could move as early as next week or early next year to scale back the $85 billion a month in bond purchases that are the centerpiece of its quantitative-easing program.
The prospect of an early tapering had spooked bond investors earlier this year, sending yields soaring.
November federal budget data are due at 2 p.m. Eastern.
A further round of supply is also on tap Wednesday, with the government set to sell $21 billion in 10-year notes. A sale of $30 billion of three-year notes saw strong demand on Tuesday.
William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.
