NEW YORK, Oct 9 (Reuters) - Long-dated Treasury yields rose ahead of large auctions this week - a $24 billion reopening of 10-year notes on Wednesday and a $16 billion reopening of 30-year bonds on Thursday - as increases in supply drive prices lower.
The benchmark 10-year yield rose 1.7 basis points on Wednesday morning to 1.556%, steepening the yield curve, often measured as the spread between two- and 10-year yields. That spread was last at 13.3 basis points, reapproaching the two-month high hit last week.
Wednesday morning’s pressure on Treasury prices comes “I think predominantly ... ahead of supply and concern about how low rates already are. There may have to be some concession ahead of the reopening of 10-year Treasuries today and then the reopening of the 30-year tomorrow,” said Michael Lorizio, senior fixed income trader at Manulife Investment Management.
The 30-year bond yield was up 2.5 basis points ahead of Thursday’s auction. Record amounts of 10- and 30-year debt have been sold by President Donald Trump’s Treasury Department as his administration has increased government spending in the face of decreasing revenue from taxes.
U.S. stock indexes opened higher on Wednesday morning in response to headlines about possible progress in the U.S.-China trade war, with negotiations resuming between the two countries in Washington on Thursday. But the effect on the Treasury market was minimal, analysts said.
“It’s really difficult to see any signs of progress or change. It’s difficult because you don’t want to ignore headlines, but at the same time each headline seems to say the same thing - that both sides want to see something happen and both sides are encouraged that something may happen,” said Lorizio.
“You see in the pricing of the entire yield curve that not a whole lot is expected in the near term.”
Later Wednesday, minutes from the September meeting of the Federal Reserve’s policymaking committee will be released. At that meeting, the board decreased interest rates by 25 basis points, though there was some dissent among members. “It will be good to see a more descriptive picture of how divided the committee is perhaps,” Lorizio said.
But more important are Chair Jerome Powell’s remarks this week. On Tuesday, he announced that the Fed would begin its bond-buying program again to help relieve stress in money markets. He is slated to speak on Wednesday again.
“I think as far as the future path, it will be more important to hear what the chairman is saying,” said Lorizio.
Reporting by Kate Duguid; Editing by Steve Orlofsky