US Treasury yields rose on Wednesday with 10-year yield reaching a 2-1/2 week high as investors reduced their bond holdings to make room for this week's government and corporate debt supply. A recovery of stock prices on Wall Street the prior two sessions, before a slight pullback on Wednesday, also underpinned the rise in bond yields, analysts said.
Investors unloaded equities and other risky assets last week on concern about the potential for massive damage from Hurricane Irma and tension between North Korea and the United States and its allies over Pyongyang's nuclear weapons program. Safe-haven buying of Treasuries knocked the benchmark 10-year yield to a 10-month low, just above 2 percent on Friday,
before turning higher this week on reduced tension between Washington and Pyongyang and early signs that destruction from Irma in the United States would not be as devastating as some had feared. "The bond market is comfortable in a 2.10-2.30 percent range. We need new stresses to push it out of that range," said Matt Toms, chief investment officer of fixed income at Voya Investment Management in Atlanta.
The 10-year yield was at a 2-1/2 week peak of 2.195 percent, up more than 2 basis points on the day. The 30-year bond yield hovered near a three-week high at 2.792 percent, up nearly 2 basis points, following a $12 billion auction of long bond supply. This final leg of this week's $56 billion in coupon-bearing Treasuries supply met mediocre demand in the aftermath of poor bidding at the three-year and 10-year auctions earlier this week.
"It's the bearish mentality at these (low) yield levels," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York.