Fed Reserve’s global focus keeps USA 10-year yields near two-month low

Bloomberg

Treasury 10-year note yields held near the lowest in two months as investors weigh the Federal Reserve’s aim to raise U.S. interest rates against signs of slow global economic growth.
The benchmark notes were little changed before the U.S. sells $20 billion of the debt on April 13, the second of three coupon-security auctions this week totaling $56 billion. Economic reports this week will show U.S. retail sales and the consumer-price inflation rate both increased in March after contractions the month before, according to economist forecasts.
Fed Chair Janet Yellen on March 29 said caution in raising rates is “especially warranted” as the global economy presents heightened risks. Fed officials seek to tighten monetary policy amid improving U.S. economic data even as central banks abroad add to stimulus. Traders assign about a 47 percent probability to a rate increase by the end of this year, according to futures data compiled by Bloomberg.
“It’s a confused sentiment,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “The Fed introduced the third mandate of global growth that Yellen threw at us. That’s opened up a new door to find ways to keep rates low.”
Benchmark 10-year Treasury note yields rose less than one basis point, or 0.01 percentage point, to 1.73 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The yield touched 1.69 percent on April 7, the lowest since Feb. 11. The price of the 1.625 percent security due in February 2026 fell 2/32, or 63 cents per $1,000 face amount, to 99 3/32.
Debt Auctions
In addition to Wednesday’s 10-year note sale, the U.S. is scheduled to sell $24 billion of three-year notes Tuesday and $12 billion of 30-year bonds April 14. In the when-issued market, the 10-year notes traded around the lowest yield at an auction of the securities since 2012.
“There should be fairly decent demand for most of those auctions,” said Aaron Kohli, a fixed-income strategist in New York for BMO Capital Markets, one of 22 primary dealers that trade with the Fed. “Markets are still grappling with what central banks can do.”
Uncertainty over the outlook for the U.S. economy is higher than usual, which calls for a “cautious and gradual approach” to interest-rate increases, Fed Bank of New York President William C. Dudley said last week.
“It may be hard for the Fed to tighten this year,” said John Brynjolfsson, founder of money manager Armored Wolf, in a Bloomberg Television interview on Monday. “In the short term, bond yields are likely to stay low and maybe even get a little bit lower from here before they start kind of a secular rise.”