U.S. Treasury yields down for third straight day as oil prices slide further

Investors will watch the outcome of a 7-year Treasury auction later in the day following a solid sale of 2-year debt and a sale of 5-year paper that attracted softer demand on Monday. On the economic data front, the June U.S. Personal Consumption Expenditures Price Index, which has typically been the Fed's favoured measure of inflation, lands on Thursday, along with a second-quarter GDP reading. U.S. Treasury yields fell to their lowest levels in about a week on Tuesday, extending declines into a third straight session as oil prices continued to fall on rising hopes that the conflict between the United States and Iran could see a resolution, heading into the Federal Reserve's rate decision this week. Oil prices slipped to a more than one-week low after topping the $100 a barrel mark last week. U.S. President Donald Trump on Monday said the United States was having "good talks" with Iran and there was a chance of a deal over their conflict, but warned that U.S. strikes would resume if the negotiations failed to deliver. Things remained shaky at best as Saudi Arabia, Jordan and Iraq reported drone attacks on Monday. Brent crude futures LCOc1 were last down 2.8% at $83.5 per barrel, still about 17% above levels seen before the conflict began earlier this year. "A return to pre-war and early July levels is a big ask without fully-fledged commitment to peace and re-opening of the Strait of Hormuz," Societe Generale strategists said in a note. While investors broadly expect the Fed to hold its main lending rate steady on Wednesday, there is some scepticism. Money markets show traders still see a near 34% chance of a 25-basis-point rate hike, according to the CME FedWatch Tool. "This reflects renewed geopolitical tensions, the absence of explicit guidance, and perhaps the fact there is a press conference. Such elevated odds just two days before an FOMC meeting are quite unusual, as the Powell-era Fed generally telegraphed moves clearly," said Xiao Cui, senior economist at Pictet Wealth Management. Last month, Fed Chair Kevin Warsh, in his first meeting at the helm of the central bank, moved quickly to trim the Fed's public messaging, delivering a shortened policy statement and explicitly declining to offer forward guidance in a return to a format similar to that used by former Chair Alan Greenspan. Traders are fully pricing in the chance of a September rate hike, along with a 68% chance of an additional hike by year-end. U.S. President Donald Trump on Monday called on the Fed to lower interest rates. The yield on the benchmark U.S. 10-year Treasury note US10YT=RR shed 2.3 basis points to an about one-week low of 4.618%, down for the third straight session -- a streak last seen a month ago. Yields on the 30-year bond US30YT=RR also dipped for the third straight day, down 1.3 basis points at 5.112%. Despite the recent declines, yields on 10-year and 30-year bonds are set for their biggest monthly jump since March, as traders ramp up interest-rate hike bets on growing inflation concerns due to the oil spike. The 2-year yield US2YT=RR is headed for a fifth straight monthly rise.

U.S. Treasury yields down for third straight day as oil prices slide further

Auctions and upcoming data

Treasury yields extend declines

Fed meeting and rate expectations

Benchmark yields at about one-week lows

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