Long-dated Treasury yields down

Longer-dated US Treasury yields fell on Tuesday on month-end buying and shorter-dated yields rose on bets the Federal Reserve might raise interest rates as soon as March, causing a part of the yield curve to hit its flattest level since November. The Treasuries sector was on track in February to post its biggest monthly total return since June, according to an index compiled by Bloomberg and Barclays.
Investors awaited possible details on tax cuts, reduced regulation and infrastructure spending from US President Donald Trump who was scheduled to speak before a joint session of Congress at 9 pm (0200 GMT Wednesday).
Treasury yields have retreated since mid-December when benchmark yields reached their highest in over two years on expectations of swift implementation of fiscal measures pledged by Trump during his campaign last year. Details on these programs, which investors had bet on to cause a surge in federal debt and domestic inflation, have been scarce. Some of them hoped Trump's upcoming speech will offer specifics on his perceived pro-growth economic agenda.
"The bond market is waiting and looking at the uncertainty that things may take longer-than-expected," said Andrew Richman, director of fixed income at SunTrust Advisory Services in Jupiter, Florida. The benchmark 10-year Treasury yield was marginally lower in late trading at 2.365 percent, while the 30-year yield was down nearly 2 basis points at 2.967 percent.
In contrast two-year yield, which is most sensitive to traders' view on Fed policy, was up over 3 basis points at 1.236 percent. The spread between two-year and 10-year yields shrank to 112 basis points, its tightest level since November. A number of Fed officials have said the US central bank is considering raising interest rates soon as the economy approaches full employment and its 2 percent inflation goal.
San Francisco Fed President John Williams said a rate hike at the Fed's March 14-15 meeting is up for "serious consideration," while Philadelphia Fed chief Patrick Harker said he was clinging to his outlook for three rate increases in 2017. Interest rates futures implied traders saw about a 37 percent chance on a March rate hike. The over-the-counter swap market suggested traders assigned a 60 percent probability for a such a move. Some analysts remained skeptical of a rate increase in two weeks as economic data depicted only a modest pace of expansion that doesn't require a faster pace of rate hikes.