Treasuries-Yields steady as traders await key inflation data

The Treasury will auction $119 billion in coupon-bearing debt this week, including $58 billion in three-year notes on Tuesday, $39 billion in 10-year notes on Wednesday, and $22 billion in 30-year bonds on Thursday.

The 2-year note yield, which typically moves in step with Fed interest rate expectations, was flat at 4.379% while the yield on benchmark 10-year notes was flat at 4.784%.

Yields rose earlier on Tuesday as oil prices hit multi-week highs after Iran-backed Houthis attacked Saudi energy facilities and Tehran threatened the U.S. with "economic warfare."

The 10-year yield is trading near its highest level since October 2023 as investors position for possibly higher interest rates, a "higher-for-longer" inflation backdrop, and a still-resilient economy.

"The rising yields we've seen so far are pretty close to fundamentals,” said Compernolle, adding that “this could just be a sign of the new normal. It's not necessarily symptomatic of something going wrong."

The climb, which has also pushed 30-year yields to their highest levels since 2007, has stoked concerns about demand for U.S. debt as the government's fiscal trajectory continues to deteriorate.

U.S. Treasury yields were steady on Tuesday as traders awaited key inflation data due later this week for clues on whether the Federal Reserve is likely to raise interest rates this month.

Traders raised bets on a rate hike at the U.S. central bank’s September 15-16 meeting after the Labor Department reported last week that employers added far more positions than expected in August.

But this week's producer and consumer price reports are seen as the real test, with policymakers looking for further evidence that inflation pressures are continuing to cool.