US Treasurys

Treasury yields decline as markets ponder future Fed policy

Treasury yields fell on Tuesday as uncertainty over future Federal Reserve policy weighed on markets and investors assessed earnings reports.

The yield on the benchmark 10-year Treasury note was last down by around 17 basis points to 4.067%. It has had a volatile start to the week, falling early during Monday's trading day before recovering the decline.

The 2-year Treasury yield was last at 4.46%, falling by around 4 basis points.

An auction of 2-year notes worth a total of $42 billion that took place Tuesday was considered "soft" by BMO Capital Markets, with a tail of 1.1 basis points and non-dealer bidding at 75.8% compared to the 81% average. The auction stopped at 4.460%, coming in at a higher percentage than the six-auction average of 3.133%.

Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.


Uncertainty about the Federal Reserve's policy path has been spreading, raising questions about how long the central bank will continue hiking interest rates and by how much they will be increased.

After weeks of hawkish comments from Federal Reserve speakers, which indicated that rates would be hiked until inflation declined, the Wall Street Journal reported on Friday that some central bank officials were starting to feel uneasy about the speed of the hikes.

Some investors have been concerned about the pace of rate hikes leading to a recession. On Monday, the S&P Global Composite PMI, which measures activity in the manufacturing and services sector, indicated that the U.S. economy is contracting as it declined to 47.3.

Traders have also been paying close attention to earnings reports, especially earnings estimates for the remainder of 2022 and 2023, to assess the state of the economy and consumer appetite.