By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices turned lower Tuesday, sending yields up for a second day, after the National Association of Realtors said pending sales of existing homes rose 2.6% in June, a fifth straight monthly gain.
Treasurys had been supported in earlier trading as investors stepped back from an equity-buying binge.
"Y ields reversed higher on the NAR pending homes sales bounce, which added to the growing volume of bottoming housing stats," said analysts at Action Economics.
Ten-year-note yields (UST10Y 3.68, +0.05, +1.43%) rose 5 points, or 0.05 percentage point, to 3.68%, after earlier falling as low as 3.58%. Yields move inversely to prices.
Yields on 2-year notes (UST2YR 1.20, +0.02, +1.61%) rose 2 basis points to 1.21%, increasing for the sixth day in seven.
U.S. equities drifted lower on Tuesday as markets retrenched after crossing key technical levels and hitting multi-month peaks in the last session. The Standard & Poor's 500 Index (SPX 1,002, -0.52, -0.05%) fell 0.2%.
Treasurys held on to gains early in the day after the Commerce Department said consumer spending in the U.S. rose 0.4% in June, slightly better than economists surveyed by MarketWatch had expected. Personal income fell 1.3%, reversing the May gain from stimulus payments. Economists predicted income would decline 1.2%. See Economic Report.
The report also said consumer prices, excluding food at home and energy, rose 0.2%. In the past year, core prices have increased 1.5%. In the past year, overall prices declined 0.4%.
"This should help temper any near-term inflation fears," said strategists at Brown Brothers Harriman.
Bond investors are very sensitive to risks of inflation because it erodes the value of fixed-income payments.
Waiting for payrolls, auction plans
Bond traders expect prices to remain in a fairly tight range ahead of the U.S. employment report for July, set to be released on Friday. Economists surveyed by MarketWatch expect a significant drop in the number of jobs lost last month, down from the 467,000 lost in June.
The unemployment rate is estimated to have risen to 9.7% from 9.5%, the survey says. It would be the highest unemployment rate in 26 years.
"The key theme is that while monetary easing and fiscal stimulus have prevented absolute disaster, sustained, healthy economic growth is not a given at this point, and the markets need to reevaluate the investment landscape," said T.J. Marta, chief strategist at Marta on the Markets.
Also weighing on bonds, the Treasury Department will announce on Wednesday how much debt it will auction next week.
Wrightson ICAP, a research firm specializing in government debt, expects the U.S. to sell $37 billion in 3-year notes (UST3YR 1.73, +0.04, +2.07%) next Tuesday, which would be $2 billion more than last month.
It will auction $23 billion in 10-year debt and $15 billion in 30-year bonds (UST30Y 4.45, +0.04, +0.93%) on the following two days, each up $1 billion from the previous sales of new securities, Wrightson predicts.
