NEW YORK: US Treasuries fell on Tuesday, with analysts and traders citing a stabilization of Chinese equities prices and a new supply of issuance exacerbated by seasonally low trading volumes.
A smattering of US economic data showing a rise in single-family home sales in May, albeit below estimates, and a drop in a measure of consumer confidence for July had little impact on the overall direction of the market.
Investors were heartened by Chinese equity prices' closing well off their session lows, even though they ended with a loss for the day.
The rout in China's stock market has heightened concern that the world's second-largest economy is heading for trouble despite emergency measures by the government to prop up prices.
"Treasuries selling started with the overnight trading after Chinese equities bounced off their lows, and that helped release some of the safe-haven bid in Treasuries," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
The relative safety of US Treasuries has served as a haven for global investors unsettled by China's recent volatility.
In addition, US government bonds, especially on the long-end of the yield curve, have benefited from the expectation that the US Federal Reserve will move off its zero interest rate policy sometime this year with an increase.
Investors, while not expecting the Fed to raise rates on Wednesday at the conclusion of a regularly scheduled two-day meeting, will parse the statement for clues on the timing of an increase.
September is often cited as lift-off time, but a strong chorus of analysts says it could come later, depending on the strength of economic data.
Another factor weighing on prices is the upcoming issuance of Treasury bills, traders said. Indeed, the US government has plans to issue $90 billion worth of fixed-rate notes in the belly of the curve, meaning 2-year, 5-year, and 7-year notes this week. An additional $15 billion of 2-year floating rate notes are also due to be sold.
In midmorning trade, the 10-year US benchmark Treasury traded down 8/32 of a point in price, lifting the yield, which moves in the opposite direction, to 2.25 percent.
The 30-year Treasury bond fell 17/32 of a point in price, lifting the yield up to 2.97 percent.
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