NEW YORK: US government bond yields edged up on Friday, with the 10-year yield touching a two-month high, as traders look ahead to a busy week of central bank meetings including a key one at the Federal Reserve. The 10-year yield briefly touched 1.3855%, its highest level since July 14, and was set for a fourth consecutive week of increases, the longest such streak since March.
Investors hope to get more clarity from the Fed regarding the schedule for slowing down its asset purchases, which will also give a rough timeline for when the next rate increase could come. The Fed is expected to tie any policy decision to US job growth in September and beyond.
Other than the Fed's two-day meeting ending on Wednesday, the central banks of China, Japan, Sweden, Brazil, the United Kingdom and Turkey are among those scheduled to meet next week to discuss monetary policy.
"My sense is that nobody really wants to be particularly aggressively positioned" going in to next week, said Guy LeBas, chief fixed income strategist at Janney.
He said the Treasury market was "slowly bleeding out the CPI rally" that took yields to three-week lows earlier in the week. The yield on 10-year Treasury notes was up 3.9 basis points at 1.3702%. The yield on the 30-year Treasury bond was up 2.6 basis points at 1.9071%.
The Fed's reverse repo facility, which offers approved money managers the option to lend money overnight to the US central bank in return for Treasury collateral, set a record $1.218 trillion on Friday. Borrowing rates in the overnight repurchase agreement market were at five basis points.
A record amount in the reverse repo speaks to an abundance of cash in bank coffers with nowhere to go. 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 114.2 basis points. The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 0.9 basis points at 0.226%.
The US government will auction $24 billion in 20-year bonds on Sept. 21 and $14 billion 10-year TIPS on Sept. 23 in reopenings that will both settle on Sept. 30.
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