US Treasurys follow European bonds lower as Draghi talks up ECB adjustments

U.S. government debt prices were lower on Tuesday, following their European counterparts, as European Central Bank President Mario Draghi raised the possibility of monetary policy changes.

Draghi said the ECB could adjust its policy tools of sub-zero interest rates and massive bond purchases as economic prospects improve in Europe.

But any change in the bank's stance should be gradual, as "considerable" monetary support is still needed and the rebound in inflation will also depend on favorable global financing conditions, he added.

The yield on the benchmark 10-year Treasury note sat higher at 2.2 percent at 3:07 p.m. ET, while the yield on the 30-year Treasury bond was up at 2.745 percent. Bond yields move inversely to prices.

US 10-year yield intraday chart

Source: FactSet

European yields also spiked, with the German 10-year yield trading near 0.34 percent and the UK 10-year yield advancing to trade at 1.078 percent.

Investors also digested a major Treasury department sale. The Treasury Department auctioned $34 billion in five-year notes at a high yield of 1.828 percent on Tuesday.

The bid-to-cover ratio, an indicator of demand, was 2.33.

Indirect bidders, which include major central banks, were awarded 65.2 percent. Direct bidders, which includes domestic money managers, bought 9.2 percent.

The five-year yield traded higher at 1.822 percent following the sale.

The moves higher come as a whole host of officials from the Federal Reserve are set to speak on Tuesday, with investors keeping an eye out for any hints as to how the U.S. economy is performing.


Fed Chair Janet Yellen was in London, where she said banks are "very much stronger," adding that another financial crisis is not likely in our lifetime."

Meanwhile, Minneapolis Fed President Neel Kashkari said it was a mistake to raise interest rates as inflation data are still tepid.

On Tuesday, San Francisco Fed President John Williams told an audience at Macquarie University in Sydney that advanced economies could find themselves stuck with slow growth over the long-term, unless fiscal authorities do something pivotal to turn things around; Reuters reported.

Philadelphia Fed President Patrick Harker said Tuesday he sees the Federal Reserve on track to raise rates once more this year.

Stepping aside from central bank news, the S&P/Case-Shiller Home Price Index showed home prices rose 5.5 percent in April, below the expected increase of 5.8 percent.

Other data released include consumer confidence for June, which topped expectations.

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—Reuters contributed to this report.