US Treasury yields rose on Tuesday to their highest levels in nearly a week after strong data reinforced the theme of a strengthening US economy and rising inflation. Yields on most maturities touched their highest levels of the day after the release of solid readings on the US housing market.
Data from the S&P CoreLogic Case-Shiller composite index showed US metro area home prices increased modestly in October, gaining slightly more than expected for the month-on-month readings. The Case-Shiller index was the latest in a number of solid reports on the US economy showing inflation may already be gaining steam.
"Home prices and the economy are both enjoying robust numbers," said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. Benchmark 10-year Treasury notes fell 9/32 in price to yield 2.571 percent, while yields on the 30-year bond rose to 3.151 percent, the highest since December 21. Rising inflation lowers the value of already-held bonds, with Treasuries of longer-dated maturities generally being the most sensitive.
Low-volume trading following the Christmas holiday that closed markets on Monday and ahead of the New Year holiday this weekend also exaggerated moves, analysts said. "The numbers were stronger than expected so that kind of puts you in a direction, and the thinness in this market probably puts you this far in that direction," said Lou Brien, market strategist at DRW Trading in Chicago. "It doesn't take much selling or buying to push it one way or another this week."
The market produced a limited reaction to US consumer confidence data, which rose to its highest level in 15 years this month as expectations for strength in job growth, business conditions and the stock market continued to build following the US presidential election. Shorter-dated US 2-year and 3-year note yields rose to their highest since December 20 and December 21, respectively, after light bidding for the government's auction of $26 billion in 2-year notes, which sold at a yield of 1.28 percent.
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