Bond Report: Treasury yields fall back as stock market sees renewed pressure

Treasury yields were back under pressure Tuesday as renewed weakness in equities stirred safe-haven demand for government debt.

What yields are doing
  • The yield on the 10-year Treasury note

    fell to 2.815% versus 2.857% at 3 p.m. Eastern on Monday. Yields and debt prices move opposite each other.

  • The 2-year Treasury-note yield

    was 2.583%, down from 2.622% Monday afternoon.

  • The yield on the 30-year Treasury bond

    pulled back to 3.03% from 3.065% late Monday.

What’s driving the market

Treasury yields have seen back-to-back weekly declines after a run-up that took the 10-year above 3% to its highest level in around 3 1/2 years earlier this month. Analysts have attributed renewed demand for Treasurys to demand for safe-haven assets fueled by a stock-market selloff that’s seen the large-cap benchmark S&P 500

tumble toward a bear market.

Read: When will stocks find a bottom? Treasury rates need a footing first, says this strategist

Investors remain focused on inflation and the Federal Reserve’s response. The central bank, which is set to begin unwinding its balance sheet on June 1, delivered a half-point rate increase earlier this month following a more traditional quarter-point, or 25 basis point, rise earlier this year. Fed officials have signaled at least two more half-point rises are in store.

May U.S. purchasing managers index readings for manufacturing and services are due at 9:45 a.m. Eastern on Wednesday, with April new home sales set for release at 10 a.m.

Minutes of the Fed’s May 3-4 meeting are scheduled for Wednesday afternoon. The Fed’s preferred inflation indicator — the core personal consumptions expenditure index — will come out Friday morning.

What analysts say

Global sentiment “will remain an important driver for trading. Equity futures suggest that yesterday’s equity rebound still might turn into a new sell-on upticks move,” wrote analysts at KBC Bank in Brussels in a Tuesday note. “This might cap a further rise in core yields, confirming recent consolidation pattern on [eurozone and U.S.] interest-rate markets.”