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U.S. Treasury yields move lower as traders turn attention toward Fed

U.S. Treasury yields fell early Tuesday as attention shifted away from positive vaccine developments and toward the prospect of a more active Federal Reserve.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.876%

fell 2.4 basis points to 0.882%, while the 2-year note rate
TMUBMUSD02Y,
0.177%

dropped 0.2 basis point to 0.177%. The 30-year bond yield
TMUBMUSD30Y,
1.627%

slipped 2.5 basis points to 1.634%. Yields and bond prices move in opposite directions.

What’s driving Treasurys?

Analysts are beginning to voice hopes that the U.S. central bank will tweak its asset purchases, shifting the brunt of the buying toward longer-term Treasurys. The Fed snaps up $80 billion of bonds every month, but the average maturity of their purchases have steadily declined.

The move would be expected to push down rates of extended maturities and flatten the so-called yield curve, measured by the yield gap between short and longer-term debt.

Investors are also facing a deluge of U.S. economic data that could indicate if growth is flagging in the face of an intensifying COVID-19 pandemic. Last month’s retail sales data and an import prices index are due at 8:30 a.m. ET, followed by October industrial production numbers at 9:15 a.m.

The National Association of Home Builders will release their index of housing market activity for November at 10 a.m.

What did market participants’ say?

“Various analysts have been talking up the possibility the FOMC addresses a longer duration for its monthly $80 billion Treasury purchases in the secondary,” said Jim Vogel, an interest-rate strategist at FHN Financial.


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