Yields rise, curve steepens as investors embrace risk

CHICAGO: US Treasury yields climbed on Tuesday and the yield curve steepened as investors flocked to riskier assets like stocks, which opened higher.

The benchmark 10-year yield was last up 3 basis points at 1.1065%.

A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes , was last up 2.35 basis points at 98.96 basis points.

The spread between five-year notes and 30-year bonds , which is at levels last seen in 2016, was last at 143.50 basis points.

"It's a bit of a risk-on trade weighing on Treasuries," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco, adding that corporate bond issuance was also fairly heavy this week.

The bond market was looking ahead to Wednesday's quarterly refunding announcement, which includes anticipated auction sizes for each maturity of notes and bonds. The US Treasury Department on Monday reported lower anticipated borrowing during 2021's first and second quarters along with a huge cash balance.

"I think the Treasury can keep issuance unchanged after it severely cut back the borrowing requirements for Q1 and Q2 with yesterday's announcement," Rupert said. "So I don't expect any increases in Treasury supply relative to kind of where we are right now."

The Treasury's borrowing estimates do not include assumptions for any future enacted coronavirus relief and stimulus-related measures, which it said could boost actual borrowing.

The Democratic-led US House of Representatives on Tuesday prepared to take the first step forward on President Joe Biden's $1.9 trillion package to aid the coronavirus-battered economy.

On Monday the Democratic president met with 10 Republican US Senators who are seeking a downsized $618 billion plan. While the White House said the discussion was "productive," Biden told the senators their plan did not go far enough. [ ]

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was last up less than a basis point at 0.1152%.