Treasury yields rise

US Treasury yields rose on Tuesday as some investors pared bond positions to make room for this week's federal and corporate supply while others reduced safe-haven bond holdings in favour of stocks. Some traders also turned cautious ahead of the release of the Federal Reserve's minutes of its May 2-3 meeting at 2 pm (1800 GMT) on Wednesday. They may contain clues on the timing of the next rate increase and a possible plan for slowing the central bank's bond reinvestments, analysts said.
Wall Street stock prices rebounded further on Tuesday from last week's lows as investors seemed relieved that US President Donald Trump's budget plan contained no big surprises. Last Wednesday, stocks tumbled and bonds rallied with yields falling to near one-month lows as news reports raised worries about whether a widening probe into the Trump campaign's possible ties with Russia in 2016 would hurt the chances of the passage of tax cuts and other fiscal stimulus.
Those fears have abated since, even as more stories have emerged that cast a cloud over Trump's presidency, analysts said. "As the perception of risk has faded, we are starting to revert to the mean," said Bruno Braizinha, interest rate strategist at SG Corporate & Investment Banking in New York. The benchmark 10-year Treasury note yield was 2.287 percent, up three basis points from late Monday, while the 30-year bond yield was more than three basis points higher at 2.949 percent. US yields reversed their earlier drop because of safe-haven bids stoked by a suicide bombing that killed at least 22 people and injured 59 at a concert hall in the English city of Manchester Monday evening.
A solid $26 billion of a two-year note auction, the first part of this week's $88 billion in coupon-bearing government bond supply, failed to rekindle bids for Treasuries on the secondary market. The latest two-year sale fetched the strongest bidding in a year. The US Treasury Department will sell $34 billion in five-year notes on Wednesday.
Investors and dealers were also contending with substantial corporate supply. Companies were expected to issue up to $35 billion in high-grade bonds this week before a three-day US holiday weekend, according to IFR, a Thomson Reuters unit. The US bond market will close early at 2 pm (1800 GMT) on Friday and will be shut on Monday for the Memorial Day holiday.