Treasuries gain

The US Treasury debt yields remained solidly anchored on Monday near the middle of a range that has held since mid-December, ahead of upcoming supply and a Federal Reserve meeting this week. But with the new debt supply coming as the Fed continues to buy Treasuries, and with the US central bank not seen announcing any significant policy changes, yields are not expected to break out of the current range any time soon.
That left benchmark 10-year Treasury notes to trade unchanged in price on Monday with a yield of 3.41 percent, not far off the middle of a range of 3.25 percent to 3.51 percent that has held for over five weeks.
The Treasury will sell $35 billion of two-year notes on Tuesday, $35 billion in five-year notes on Wednesday, and $29 billion in seven-year notes on Thursday, the same sizes that the Treasury sold in December.On Monday, the Fed bought $8.869 billion in Treasuries with maturities ranging from August 31, 2016, to December 31, 2017. The Fed is expected to buy a total of up to $26 billion in US debt across the curve this week.
Traders will also focus on the fiscal policy aspects of President Obama's State of the Union address on Tuesday. While Treasuries prices were mostly little changed on Monday, a portion of the yield curve flattened from record levels set last week, when the spread between two- and 30-year yields reached four percentage points. Traders said the flattening, with yields rising more at the short- to medium-term part of the curve, made the notes to be sold this week more appealing to buyers.
Among the three maturities to be sold this week, two-year notes traded unchanged in price on Monday with a yield of 0.63 percent, while five-year notes were also unchanged with a yield of 2.01 percent. Seven-year notes edged up 1/32 in price to yield 2.75 percent.
Thirty-year bonds gained 2/32 in price to yield 4.56 percent.