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Bond Report: 10-year Treasury yield falls below 3% as buyers return to bond market

Treasury yields fell for a second day on Tuesday, with the 10-year rate hovering near the 3% level as a selloff in the bond market eased ahead of a busy day of appearances by Federal Reserve officials.

What yields are doing

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.014%

was at 3.014%, down from 3.08% at 3 p.m. Eastern on Monday, when it had briefly traded above 3.2%. Yields and debt prices move opposite each other.

The 2-year Treasury note yield
TMUBMUSD02Y,
2.585%

was at 2.598%, down from 2.618% Monday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.143%

fell to 3.148% from 3.206% late Monday.

What’s driving the market

The 10-year yield briefly topped 3.20% on Monday before pulling back. Yields had surged to levels last seen in late 2018 after the Federal Reserve last week delivered a half-point increase in the fed funds rate and announced it would begin unwinding its balance sheet on June 1.

Stocks and bonds both saw volatile trade, with major equity indexes coming under renewed pressure after initially bouncing in the wake of the Fed decision on Wednesday. The S&P 500
SPX,
-3.20%

on Monday finished at its lowest since March 31, 2021.

Worries over the outlook for growth and the potential for stagflation have weighed on stocks and other assets viewed as risky. Inflation data will be in focus Wednesday, with the release of the April consumer price index.

Tuesday, meanwhile, brings a number of appearances by Fed officials.

New York Fed President John Williams was scheduled to speak at an event in Germany at 7:40 a.m. Eastern, while investors will also hear from Richmond Fed President Thomas Barkin, Fed Gov. Christopher Waller, Minneapolis Fed President Neel Kashkari, Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic over the course of the day.

The Treasury Department will auction $45 billion of 3-year notes
TMUBMUSD03Y,
2.786%
.

What analysts say

“Yields down, equities up, a slightly softer dollar; it’s turnaround Tuesday, but not with much conviction!” said Kit Juckes, global macro strategist at Societe Generale, in a note.

“China’s zero-COVID policy still hurts and concerns about its real estate sector haven’t gone away, either. Nor has Europe’s reliance on Russian energy, or the war in Ukraine. Last but by no means least, the Fed is still set to raise rates by 50bp at upcoming meetings. Turnaround Tuesday is a timid affair,” he wrote.

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