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Bond Report: 10-year Treasury yield nudges below 1.6% as traders return from holiday

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Treasury yields edged lower Tuesday, as investors returned from a three-day holiday weekend, with attention expected to be centered on this week’s round of U.S. inflation data.

What are yields doing?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    1.597%

    edged down to 1.599%, compared with 1.604% at 3 p.m. Eastern on Friday. Yields and debt prices move in opposite directions.
  • The 2-year Treasury note yield
    TMUBMUSD02Y,
    0.349%

    rose to 0.346% from 0.318% Friday afternoon.
  • The 30-year Treasury bond yield
    TMUBMUSD30Y,
    2.133%

    declined 2.8 basis points to 2.136%.
What’s driving the market?

The Treasury market was closed Monday for the Columbus Day holiday, as global bond yields edged higher. Many of those yields edged back on Tuesday, however.

Rising commodity prices, led by oil and natural gas, have contributed to concerns about potential inflationary pressures, alongside widespread supply-chain bottlenecks, analysts said. Meanwhile, the Federal Reserve is seen as likely to follow through on expectations it will announce its plan to begin tapering monthly asset purchases next month.

News reports said China Evergrande Group, the troubled real-estate developer, missed a third round of bond coupon payments in three weeks, underlining worries about China’s highly leveraged property sector.

The National Federation of Independent Business early Tuesday said its optimism index slipped one point to 99.1 in September, the lowest reading since March, as small-business owners remained frustrated by shortages of supplies and skilled labor.

Data on August job openings is set for release at 10 a.m. Eastern. The Treasury Department is set to auction 3-year notes
TMUBMUSD03Y,
0.607%

later Tuesday.

The September reading on the consumer-price index is due Wednesday morning.

What are analysts saying?

“With investor anticipation continuing to build ahead of tomorrow’s CPI release from the U.S., yesterday saw yet another round of commodity price rises that’s making it increasingly difficult for central banks to argue that inflation is in fact proving transitory,” said Jim Reid, strategist at Deutsche Bank, in a note.

“You don’t have to be too old to remember that back in the summer, those making the transitory argument cited goods like lumber as an example of how prices would begin to fall back again as the economy reopened. But not only have commodity aggregates continued to hit fresh highs since then, but lumber (+5.49%) itself followed up last week’s gains to hit its highest level in 3 months,” he said.

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