Yields head lower as more supply looms

CHICAGO: U.S. Treasury yields fell on Monday, retreating a bit from last week's higher levels as the market awaited a new burst of supply to finance stimulus efforts to combat the economic fallout from the coronavirus pandemic.

The benchmark 10-year yield was last down 3 basis points at 0.6785pc.

"We're likely experiencing a little bit of snap back from what we saw last week with yields moving out," said William Northey, senior investment director at U.S. Bank Wealth Management.

Yields rose last week as the market was hit with $112 billion in record supply of 30-year bonds and three- and 10-year notes.

Auctions this week include $25 billion of 20-year bonds on Wednesday and $7 billion of 30-year Treasury-Inflation Protected Securities (TIPS) on Thursday.

"There is a wall of supply that needs to be absorbed by the capital markets," Northey said, adding that there could be a "fatigue level" that would allow longer-term rates to drift a bit higher.

Minutes of the Federal Reserve's latest meeting, due on Wednesday, are expected to provide more insight into the central bank's view of the economic recovery. Northey said the minutes could include additional details on perspectives around inflation targeting.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 0.1451pc.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was last at 53 basis points, about 3 basis points lower than at Friday's close.