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PrintTREASURIES-US yields advance, in line with stocks, as focus shifts to Fed meeting
BY Reuters | ECONOMIC | 01/28/25 11:10 AM EST*
US data mixed overall; marginal impact on Treasuries
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US rate futures price in two rate cuts in 2025
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Focus on Fed meeting, US seven-year note auction
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 28 (Reuters) - U.S. Treasury yields rallied on Tuesday, recovering from multi-week declines in the previous session as stocks stabilized following Monday's bloodbath, as investors looked ahead to the Federal Reserve's comments on Wednesday after its two-day policy meeting.
Shares on Wall Street rose, with the Nasdaq higher and
Nvidia
"U.S. rates rallied on that Chinese AI company and so we're probably due for a selloff," said Tom di Galoma, managing director & head of fixed income trading, at Curvature Securities in Park City, Utah. "We got close to 4.51% on the 10-year yield. I kind of see that the 10-year is going back to 4.75%."
In late morning trading, the benchmark 10-year Treasury yield rose 4.3 basis points (bps) to 4.571% after falling to a four-week low on Monday. Both 20-year and 30-year bond yields also recovered from four-week troughs as well.
On the front-end of the curve, the two-year yield, which is typically tied to Federal Reserve policy expectations, edged up 2.2 bps to 4.218%. On Monday, the two-year yield dropped to seven-week lows. The three-, five-, and seven-year yields also rose from Monday's six-week lows.
Bond investors are now prepping for the Fed statement and Fed Chair Jerome Powell's press briefing.
The Federal Open Market Committee is widely expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range at the end of its two-day policy meeting. Powell will likely strike a cautious tone in his post-meeting press conference and keep the central bank's options open to allow policymakers time to assess how President Donald Trump's administration will reshape the fiscal landscape.
The U.S. rate futures market has priced in about 49 bps in cuts this year, or two rate reductions of 25 bps each, amid the tech meltdown, little changed from late on Monday, according to LSEG calculations. The market had factored in just one rate reduction all month until this week.
"The Fed is going to wait and see what happens in the new administration," said di Galoma. "They want to save any bullets they have for things that may come out."
U.S. economic reports on Tuesday, meanwhile, were mixed with durable goods new orders falling 2.0% last month, well below expectations and was the lowest since June.
U.S. consumer confidence also weakened, falling for a second straight month in January amid renewed concerns about the labor market and inflation. The Conference Board's consumer confidence index fell to 104.1 this month from an upwardly revised 109.5 in December.
U.S. home prices, on the other hand, were 0.3% higher in November and up 4.2% in the 12 months through November using the Federal Housing Finance Agency home price index.
Also on Tuesday, the U.S. Treasury is selling $44 billion in seven-year notes and $30 billion in new issue two-year floating-rate notes. Monday's sale saw mixed outcome, with softer two-year note auction and a solid five-year note sale.
J.P. Morgan, in a research note, said with "yields levels lower and both valuations and technicals mixed, we think (that)...the 7-year auction will require more of a concession in order to be digested smoothly." (Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)
