US Treasury yields rose on Tuesday, as investors continued to price in more interest rate increases by the Federal Reserve this year and next and amid a heavy corporate bond schedule this week. News of a tit-for-tat on trade tariffs between the United States and China had little impact on the US government bond market on Tuesday as benchmark 10-year and 30-year yields both climbed to fresh four-month peaks.
The rise in US average hourly earnings in the monthly nonfarm payrolls report for July and August has backed the view that inflation is picking up, justifying the continuation of the Federal Reserve's tightening policy, analysts said. Jim Vogel, interest rates strategist, at FTN Financial in Memphis, Tennessee noted that real yields on 10-year Treasuries are now forming a triple top above 0.90 percent with the same type of rapid sell-off that formed on previous two occasions, one in May and another in late July.
"The common denominator in all three was that Fed tightening was front and center for bond traders undistracted by other global developments," Vogel said. Analysts also cited heavy corporate bond supply as one factor for Tuesday's Treasuries' selling.
"The (corporate bond) calendar has been pretty large this week," said Justin Lederer, Treasury trader at Cantor Fitzgerald in New York. "This is typically Treasury-negative as investors tend to sell Treasuries because they want to make room for additional corporate bond supply." Action Economics said in its blog that corporate supply this week was around $25 billion this week after $80 billion in sales so far this month. Some of the issuers included Nestle Holdings, Toyota, and General Motors Financial.
Trade tension lingered, however, on Tuesday, but was hardly a factor in the Treasury market. US President Donald Trump on Monday announced the imposition of 10 percent tariffs on about $200 billion worth of Chinese imports, but sparing smart watches from Apple Inc and Fitbit Inc and other consumer products such as bicycle helmets and baby car seats.
On Tuesday, China hit back at the United States, announcing tariffs on about $60 billion worth of US goods, but reducing the volume of tariffs that it will collect on the products. Treasury yields rose further on the news. In afternoon trading, US 10-year yields were last at 3.044 percent, from 3.001 percent late on Monday.
US 30-year yields were at 3.193 percent, from Monday's 3.137 percent. US 2-year yields, meanwhile, last traded at 2.798 percent, up from 2.786 percent on Monday.