Treasury yields fell on Tuesday as investors assessed the possibility of the Federal Reserve taking its most aggressive move yet in the fight to tame rising inflation.
Yield on Benchmark 10 year treasury note In the previous session, it fell nearly 9 basis points to 3.276%, climbing 3.39% and seeing its biggest move since 2020.
yield on 30 Year Treasury Bond fell nearly 7 basis points to 3.298%, while the 2-year rate fell 5 basis points to 3.236%, erasing gains earlier in the session. Yields move inversely to prices, and one basis point equals 0.01%.
Monday’s 2-year and 10-year Treasury Yield Curves in short the reverse For the first time since early April, investors faced the prospect of an aggressive monetary policy tightening to tame inflation. This measure is closely monitored by traders and is often viewed as a bearish indicator.
it comes after a heavy selling During the regular session on Wall Street, market participants await the start of the Federal Reserve’s two-day policy meeting, which ends on Wednesday.
“A rise in the 10-year Treasury yield to 3.5% reflects market fears that the Fed may fall further behind the curve. This, in turn, will give the Fed less room to ‘declare victory’ and increase rate hikes.” Mark Heifel, chief investment officer at UBS Global Wealth Management.
“As a result, in our view, the risks of a Fed-induced recession have increased, and the likelihood of a recession over the next six months has increased,” Heffel said.
Investors are preparing themselves for a 75 basis-point increase from the Fed This week, many expected a 50 basis-point increase. That’s because last week’s inflation report showed prices running hotter than expected,
Federal Open Market Committee in may The target range for the federal funds rate has been increased from 0.25% to 0.75% to 1%.
On the data front, the National Federation of Independent Business Survey for May will be released around 6 a.m. ET, with the Producer Price Index for May set to follow at 8:30 a.m. ET.
The US Treasury is scheduled to auction $34 billion in 52-week bills on Tuesday.
— CNBC’s Sarah Min contributed to this report.