Traders ready for note auctions, US Fed guidance

Stable US Treasury yields on Monday showed traders preparing for a consequential week of new supply and guidance from the US central bank.

The benchmark 10-year yield was down less than a basis point at 0.6347% in morning trading.

The figure was roughly at the middle of the range where the 10-year note has traded since late March and indicated investors looking ahead to auctions of $148 billion worth of 2-year, 5-year and 7-year notes starting on Tuesday said Ben Jeffery, BMO Capital Markets rates strategist.

Remarks from Federal Reserve Chairman Jerome Powell scheduled for Thursday also could shed light on the central bank's next steps to promote an economic recovery.

"People are probably just squaring positions ahead of the more consequential events later this week," Jeffery said.

Against the backdrop of a coronavirus pandemic that has killed more than 175,000 Americans, and an ensuing recession that has seen the loss of millions of jobs and President Donald Trump's erosion in the polls, US Republicans plan a partly virtual, partly in-person convention this week featuring Trump speaking every night.

The S&P 500 and Nasdaq were set to open at record highs on Monday after the US health regulator approved the emergency use of blood plasma in COVID-19 patients and on a report that the Trump administration may fast-track a vaccine candidate.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 48 basis points, little changed from Friday's close but well above its recent low of 33 basis points reached on July 24.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was roughly unchanged at 0.1493%.