US bond yields steady

US government bond yields were steady on Monday at levels reached on Friday, as investors resisted making big trades ahead of Treasury auctions this week, the release of August consumer price index data and a meeting of the European Central Bank. On Wednesday, $23 billion in 10-year notes will be on offer and on Thursday, $15 billion of 30-year notes. New supply of Treasuries has increased sharply in 2018 as the Federal Reserve reduced bond buying and the Treasury issued new debt in order to pay for US President Donald Trump's $1.5 trillion tax cut.
"Once we get past the 10-year auction and 30-year auction on Wednesday and Thursday, the market will get a better feel of where there's real demand for 10s and 30s and to see if that flattens the curve any," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.
Investors will also be watching the release of consumer price index data, a key measure of inflation, on Thursday.
Expectations of higher inflation rose on Friday after the Labor Department reported the largest annual rise in wages since June 2009.
The department reported that average hourly earnings increased 0.4 percent, or 10 cents in August. That raised the annual increase in wages to 2.9 percent in August. The data solidified prospects of a September interest-rate hike.
The two-year yield, which reflects market expectations of Fed interest-rate hikes, was up about half a basis point on Monday to a top of 2.715 percent, its highest since July 2008.
Interest rate futures traders have fully priced in a third rate increase at the September meeting, according to the CME Group's FedWatch Tool. The odds of an additional hike in December, which would be the fourth this year, were at 72 percent on Monday, up from 69 percent the day before the jobs data release.
Investors will also be watching the European Central Bank meeting on Thursday, as the bank moves away from unprecedented quantitative easing and towards quantitative tightening.
Yields on Monday were roughly unchanged from Friday, with the 10-year yield down slightly at 2.933 percent from Friday's high of 2.950 percent, its highest since Aug. 9. The 30-year yield was down at 3.085 percent, after also hitting its highest on Friday since Aug. 9 at 3.110 percent.