U.S. budget and Wednesday’s FOMC minutes also in focus
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell on Monday, pushing up on yields, before the Federal Reserve’s first of five debt buybacks scheduled for this week.
Yields on benchmark 10-year notes (UST10Y 3.65, +0.02, +0.41%) rose 2 basis points to 3.65%.
Bond prices move inversely to their yields. A basis point is one one-hundredth of a percent.
Yields on 2-year notes (UST2YR 0.84, +0.00, +0.48%) were little changed at 0.84%, while 30-year yields (UST30Y 4.70, +0.01, +0.19%) added 1 basis point to 4.70%.
Besides a slew of U.S. economic reports due out starting Tuesday, analysts will be watching for signs of how markets handle the beginning of the federal budget process and parse minutes from the Fed’s last meeting on monetary policy, set for release on Wednesday. Read more on Obama’s budget proposal.
The U.S. central bank will buy $1 billion to $2 billion in Treasury Inflation Protected Securities, known as TIPS. The operations end at 11 a.m. Eastern time. See recent Fed buyback results.
The buybacks are the centerpiece of the Fed’s $600 billion in asset purchases intended to keep interest rates from rising too much for fear of choking off the economic recovery.
They also include purchases made under a previous program to reinvest cash from maturing mortgage-related holdings back into Treasurys, which analysts expect to total another $200 billion or so in Treasury purchases.
Since the program began in August, the Fed’s bought about $404 billion, according to Morgan Stanley.
Last week, Treasurys mustered small gains, pulled between safe-haven demand due to the political turmoil in Egypt on the one hand and the government’s quarterly refunding auctions on the other. Early in the week, yields reached the highest levels since last spring — enough of a lure for some investors to return to the Treasury market. Read more on Treasury market last week.
“What’s striking is that the market’s firmer tone to end the week was not a function of any key data — and one could argue what data there was tended to be on the firm side — but rather that a certain yield vicinity brought in demand,” said bond strategists at CRT Capital Group.
