Bond Report: U.S. Treasury yields slide as hectic auction week gets underway

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U.S. Treasury yields fell on early Tuesday’s trade as U.S. equities looked to extend their torrid selloff of last week, bolstering demand for haven assets ahead of a rush of debt issuance.

The bond market was closed in observance of the Labor Day holiday on Monday.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.667% fell 4.8 basis points to 0.675%, while the 2-year note rate TMUBMUSD02Y, 0.136% edged 1.2 basis point down to 0.139%. The 30-year bond yield TMUBMUSD30Y, 1.390% tumbled 6.3 basis points to 1.409%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Equities were on the backfoot before the opening bell, with the Nasdaq Composite COMP, -2.69% poised for a sharp drop at the start of trading. Technology stocks have given up a chunk of gains since last week after an impressive run-up since its March lows during which they led the broader market higher.

The ensuing bid for safe-haven assets helped to balance the usual bearish dynamics during a supply-heavy week. The Treasury Department is set to unload another round of record-tying auctions this week, with $98 billion of coupon-bearing debt set to hit investors starting from Tuesday’s $50 billion auction for 3-year notes in the afternoon.

No major U.S. economic data is due Tuesday, with most of the key data including consumer price numbers for August set for release at the end of the week. The NFIB Small Business Optimism Index came in at 100.2 in August, rising slightly from July’s 98.8 reading.

What did market participants’ say?

“Treasuries have been underpinned with a global ‘risk-off’ tone on continued stock weakness,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald.

“For the 3 year we expect decent demand for the issue given the current market tone, Friday’s back-up … and overall expectations for the Fed to remain accommodative,” said Lederer.