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Markets

Longer-term yields rise as investors watch Washington

  • The benchmark 10-year yield was up 2.7 basis points in afternoon trading at 0.9179%.
  • "What the market is looking for is more transparency on the Fed's future direction."
Published December 16, 2020

Longer-term US Treasury yields were higher on Tuesday as US central bank officials began a two-day meeting and investors looked for progress in congressional spending negotiations in Washington.

The benchmark 10-year yield was up 2.7 basis points in afternoon trading at 0.9179%.

In its final policy meeting of the year this week, the US Federal Reserve is expected to keep its key overnight interest rate pinned near zero and to signal it will stay there for years to come. Many analysts also expect new guidance on how long the Fed will keep up its massive bond-buying program.

"What the market is looking for is more transparency on the Fed's future direction," said Jim Barnes, director of fixed income at Bryn Mawr Trust. Currently, he said, investors lack much understanding of what would cause the Fed to increase or reduce the roughly $120 billion worth of Treasuries and mortgage securities it buys each month.

US House of Representatives Speaker Nancy Pelosi on Tuesday invited other top congressional leaders to meet at 4 p.m. (2100 GMT) as they seek to finalize a massive government spending deal and reach an agreement on a new package of coronavirus relief, a source said.

US stock indexes were higher as progress on spending talks kept spirits high and boosted by Apple Inc's plans to boost iPhone production.

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 80 basis points, about two basis point higher than Monday's close.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.121% in afternoon trading.

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