US Treasury prices gained on Monday ahead of a speech by Federal Reserve Chair Janet Yellen on Friday that will be scrutinised by investors for indications of when the US central bank will next raise interest rates. Yellen's address is in focus with no major US economic data due until Friday's second reading of gross domestic product for the second quarter.
"Everyone's kind of waiting on Yellen," said Lou Brien, market strategist at DRW Trading in Chicago. Yellen will speak as central bankers from around the world gather at an annual meeting in Jackson Hole, Wyoming. Benchmark 10-year notes gained 12/32 in price on Monday to yield 1.54 percent, down from 1.58 percent late on Friday.
Yields rose overnight after Fed Vice Chair Stanley Fischer said on Sunday that the Fed is close to hitting its targets for full employment and 2 percent inflation. "The fact that he started off with the words that we are close to our (inflation) target is definitely hawkish," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. "The question is does he represent the Fed's view." Fischer is the latest in a string of Fed officials expressing an upbeat view of the US economy.
New York Fed President William Dudley last Tuesday said that the Fed could raise rates as soon as September Atlanta Federal Reserve Bank President Dennis Lockhart also said on Tuesday that the US economy is likely strong enough for at least one interest rate increase before the end of 2016, with two hikes a possibility.
Most economists and investors view an increase in September as a long shot and see December as more likely. On the supply front, the Treasury Department will sell $88 billion in short and intermediate-dated coupon-bearing debt this week, starting with a $26 billion auction of two-year notes on Tuesday. It will sell $34 billion in five-year notes on Wednesday and $28 billion in seven-year notes on Thursday.