US Treasury yields rose on Tuesday as investors awaited the release on Wednesday of minutes of the Federal Reserve's July meeting, which will be evaluated for any new signs that an interest rate increase is likely in September. "The market is on tenterhooks trying to figure out what the Fed is going to do," said Lou Brien, a market strategist at DRW Trading in Chicago.
Many investors and economists see the Fed as most likely to make its first hike in nearly a decade next month as the labor market continues to improve. Following their two-day policy meeting in July, Fed officials said they felt the economy had overcome a first-quarter slowdown and was "expanding moderately" despite a downturn in the energy sector and headwinds from overseas.
The US economy and job market continue to strengthen, the Fed said. A discussion in the minutes of tools the Fed has to help manage an interest rate hike may be viewed as an indication that they are closer to raising rates, said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. "I think what we are going to see is how close they are to actually raising rates, and that could come off as quite hawkish," Goldberg said.
Yields rose earlier on Tuesday after data showed that US housing starts rose to a near eight-year high in July, bolstering the view that a rate hike is getting nearer. Housing starts have now been above a one million-unit annual pace for four straight months. Fed Chair Janet Yellen said in July the economy faces constraints from an underperforming housing market.
Benchmark 10-year note yields were last 2.19 percent, up from 2.17 percent before the data. Low inflation, however, may complicate a rate hike. US consumer price data for July due to be released on Wednesday morning is expected to show the Consumer Price Index rose 0.2 percent in the past year, according to the median estimate of 51 economists polled by Reuters.