NEW YORK: US Treasury yields slipped on Tuesday, consolidating recent gains ahead of a widely-expected interest rate increase from the Federal Reserve.
"With the passage of event risk such as the ECB (European Central Bank) decision last week and the conclusion of the Fed meeting tomorrow, the prospect is for more consolidation in Treasuries. That's what's happening right now," said Bruno Braizinha, interest rates strategist at Societe Generale in New York.
On Monday, benchmark US 10-year yields struck more than two-year highs above 2.50 percent, while those of 30-year bonds climbed to about 17-month peaks.
Braizinha believes there is further room for upside in 10-year yields, with Societe Generale forecasting them to hit 2.90 percent by the end of next year.
"But it's not always a straight line," he added. "Investors will be looking at the data front to see whether there is enough to sustain this bearish and steepening momentum."
Investors are also looking at the $12 billion US 30-year bond auction later on Tuesday. Analysts, however, were not so optimistic about it especially after lackluster sales of three-year and 10-year notes on Monday.
"Heading into the long-end duration supply, we are slightly cautious on demand," wrote Nomura Securities in a note. "The 30-year has been trading even richer than pre-election levels on the curve."
In addition, Nomura Securities pointed to uncertainties about the expected Fed rate hike on Wednesday, which could also keep some investors on the side lines.
In mid-morning trading, US 10-year note prices were up 1/32, while the yield fell to 2.473 percent from 2.479 percent late on Monday. Earlier on Monday, the yield hit 2.528 percent, its highest level since Sept. 29, 2014, according to Reuters data.
US 30-year bonds were up 6/32. The yield was 3.152 percent, compared with 3.162 percent on Monday.
US two-year notes were flat to lower, yielding 1.161 percent.
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