Treasury yields log biggest daily drop in a week after solid 10-year auction

By Vivien Lou Chen and Joy Wiltermuth

Rates on U.S. government debt logged their biggest daily declines in about a week on Tuesday, after a $39 billion sale of 10-year Treasury notes was met with good demand.

What's happening

The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 5.1 basis points to 4.832%, from 4.883% on Monday. Yields move in the opposite direction to prices.The yield on the 10-year Treasury BX:TMUBMUSD10Y slipped 6.5 basis points to 4.403%, from 4.468% on Monday.The yield on the 30-year Treasury BX:TMUBMUSD30Y dropped 6 basis points to 4.534%, from 4.594% on Monday.Tuesday saw the 2-year yield's largest daily drop since June 3, while it was the biggest decline for the 10-year and 30-year yields since June 4, according to Dow Jones Market Data.

What's driving markets

Yields moved lower Tuesday after a 10-year auction produced what was described by Gregory Faranello, head of U.S. rates trading and strategy for AmeriVet Securities in New York, as solid results. The $39 billion auction followed Monday's $58 billion sale of 3-year notes, which produced below-average demand from direct bidders.

Traders are looking ahead to Wednesday morning, when the consumer-price index for May will be released before the opening bell. That data will be followed in the afternoon by the Federal Reserve's policy update and forecasts. Market participants are hoping the CPI report will show inflation has continued to moderate, and that the Fed is still looking to begin cutting borrowing costs later this year.

As of Tuesday afternoon, fed-funds futures traders were pricing in a 48.3% chance that the Fed will reduce interest rates from the current range of 5.25% to 5.50% by September, according to the CME FedWatch Tool.

In Europe, French government bonds continued to sell off, with 10-year yields BX:TMBMKFR-10Y rising 1.3 basis points to 3.242% as investors continued to be anxious about France's unexpected election.

-Vivien Lou Chen -Joy Wiltermuth

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-11-24 1540ET

Copyright (c) 2024 Dow Jones & Company, Inc.