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Bond Report: Treasury yields edge lower as investors look ahead to November Fed meeting

Long-dated Treasury yields edged lower Tuesday, as investors prepared to sift through a number of economic data releases ahead of next week’s Federal Reserve meeting.

What are yields doing?

The yield on the 10-year Treasury note

slipped to 1.622%, down from 1.634% at 3 p.m. Eastern on Monday.

The 2-year Treasury note yield

edged up to 0.446%, compared with 0.435% late Monday.

The 30-year Treasury bond yield

fell to 2.07%, down from 2.085% on Monday afternoon.

What’s driving the market?

The yield curve — a line plotting yields across all Treasury maturities — continued to flatten, with long-dated yields falling as short-dated yields rose.

The Federal Reserve is seen as likely next week to announce its plan for scaling back, or tapering, and winding down its monthly bond purchases. For investors, however, the focus has moved to when the central bank will begin raising interest rates, a move that investors have moved forward in response to high inflation readings.

That’s contributed to worries that the Fed could move more aggressively than anticipated to tighten monetary policy, threatening to throw the economy into a downturn.

Meanwhile, investors will be closely tracking economic data for signs of the underlying state of the economy, which has remained resilient. While supply bottlenecks are seen contributing to inflation worries, the backlogs are the result of consumer demand for goods that continues to run strong with help from government stimulus payments earlier this year.

Data due Tuesday include the S&P Case-Shiller Home Price Index for August at 9 a.m. Eastern, while the Conference Board’s October reading on consumer confidence is scheduled for 10 a.m., as is September data on new home sales.

Top-tier data will be in view Wednesday, with the release of September durable-goods data. Figures out Thursday include weekly jobless claims and an estimate of third-quarter gross domestic product. Friday brings personal income and spending data, including the Fed’s favorite inflation measure — the core personal consumption expenditures price index.

What are analysts saying?

“The markets were pretty stable yesterday and it might be the case now that, with the Fed in its premeeting blackout period, activity settles down as investors await the Fed next week,” said Steve Barrow, head of G-10 strategy at Standard Bank, in a note. “There is still plenty of data to come this week but no realistic chance that any of it is going to sway the Fed at this late stage.”

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