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Bond Report: U.S. government bond yields rise even as global stocks see sharp selloff

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U.S. Treasury yields were inching higher but moves were comparatively subdued against the backdrop of equity markets skidding sharply lower partly on fears of out-of-control inflation.

Government bond-market investors are awaiting a report from the U.S. Labor Department on Job Openings and Labor Turnover Survey for April due at 10 a.m. Eastern Time, amid a parade of speakers from the Federal Reserve.

How are Treasury yields trading?
  • The 10-year Treasury note yield
    TMUBMUSD10Y,
    1.619%

    was at 1.609%, up 0.8 basis point from 1.601% at 3 p.m. ET on Monday.
  • The 30-year Treasury bond rate
    TMUBMUSD30Y,
    2.349%

    was at 2.337%, gaining 1.8 basis points.
  • The 2-year Treasury note was yielding 0.153%, virtually unchanged from Monday.

Bond prices rise as yields fall.

What’s driving Treasurys?

Global stock markets are unwinding recent wins amid concerns that more evidence will emerge suggesting U.S. inflation will run hotter than economists and the Federal Reserve is expecting in the aftermath of the COVID pandemic.

The fear is that a rise in inflation will prompt the Fed to pull back on its easy-money policies, ending one of the biggest supports to stocks.

Data on Tuesday showed that prices at factories in China rose at the fastest pace in 3½ years in April. China’s producer-price index rose 6.8% last month from the period a year ago, the National Bureau of Statistics said.

Bonds typically see prices rise and their yields fall as equities tumble but a jump in inflation is anathema to Treasurys because it can erode the asset’s fixed value.

Investors are keenly attuned to U.S. consumer-price data for April that is due on Wednesday, which could offer insights about the trajectory for inflation.

Before that, data on U.S. job openings will be weighed later Tuesday and investors are also bracing for an auction of $58 billion of 3-year Treasury notes later in the session.

Investors will also hear from several Federal Reserve officials on Tuesday, including New York Fed President John Williams, Fed Gov. Lael Brainard, San Francisco President Mary Daly, Atlanta Fed Raphael Bostic, Philadelphia Fed President Patrick Harker, and Minneapolis Fed President Neel Kashkari.

What are fixed-income traders and analysts saying?

“Today’s 3-year auction will not pose a significant test of Treasury appetite,” wrote Jim Vogel, executive v.p. at FHN Financial in a Tuesday research note.

“Concerns expressed in the UST curve about the arrival of the first rate hike have stretched from April 2022 to September. If data warrant a move back toward June 2022, the risk to the 3-year is minimal,” he wrote.

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