Bonds

Treasury yields off their highs after Powell strikes cautious tone on bond-buying program

Treasury yields rose on Tuesday after data showed U.S. retail sales posted the biggest monthly jump ever last month. A report that the Trump administration is preparing a $1 trillion infrastructure package also drove investors away from safe assets.

Treasurys

The yield on the benchmark 10-year Treasury note gained 2 basis points to 0.727% and the yield on the 30-year bond rose 6 basis points to 1.507%. Yields move inversely to prices. The benchmark rate hit a high of 0.77% earlier in the session.

Yields came off their highs, however, after Federal Reserve Chairman Jerome Powell signaled caution about the central bank's announced move this week to buy corporate bonds.

"It's out of an excess of caution to preserve these gains for market function by following through," Powell said Tuesday during his semiannual testimony before Congress. "I don't see us wanting to run through the bond market like an elephant snuffing out price signals, things like that."

The Fed said Monday it would include the purchase of individual corporate bonds. The move broadens the central bank's secondary market corporate credit facility (SMCCF) beyond the purchase of exchange-traded funds, as part of a continued effort to support financial market functioning and ease credit conditions.

Yields were surging before Powell's comment on a blowout retail sales reading. Data on Tuesday showed retail sales surged 17.7% in May, which easily topped the previous record from October 2001 and beat the 8% estimate from economists surveyed by Dow Jones.

Also boosted the risk sentiment was a Bloomberg News report overnight saying that the White House is drawing up a $1 trillion infrastructure proposal, focusing on traditional infrastructure such as roads and bridges along with 5G wireless networks and rural broadband.

The return of monetary and fiscal stimulus into the spotlight calmed investor nerves over a spike in coronavirus cases across multiple states since economies began reopening, which had sent yields and stock markets tumbling at the start of the week.

Auctions will be held Tuesday for $34 billion of 52-week Treasury bills, $40 billion of 119-day bills and $50 billion of 42-day bills.

CNBC's Fred Imbert contributed to this report.