U.S. yields inch higher as investors weigh rate outlook and auctions
TLT•U.S. Treasury yields edged higher as investors weighed the Federal Reserve’s rate outlook ahead of its Wednesday decision and a $70 billion five-year note auction. Futures priced in a 91% chance of no rate change this week and a roughly 75% chance of a quarter-point hike in December.
1. Yields move higher
Treasury yields rose slightly Tuesday after U.S. durable goods orders supported them early in the session. The 10-year yield was up 1.1 basis points at 4.997%, the 30-year yield rose 0.8 basis points to 5.309%, and the two-year yield gained 2.6 basis points to 4.737%.
2. Fed and auction watched
Investors were preparing for the Federal Reserve’s Wednesday decision, with the central bank widely expected to leave rates unchanged. Rate futures priced in about a 91% chance of a pause this week and a roughly 75% chance of a quarter-point hike in December. A $70 billion five-year note auction was scheduled for Tuesday, following soft demand at Monday’s two-year auction.
3. Inflation and AI concerns
Investors have weighed lingering inflation concerns, including the effect of higher oil prices, as well as signs of spending and growth in AI. Earnings from Alphabet, Microsoft and Amazon were due this week. Meta Platforms’ plan to create a new class of shares to help fund capital spending had contributed to concerns about the cost of the next phase of AI investment.
