The yield on the 2-year and 10-year U.S Treasury notes briefly traded near their highest levels since March as investors pondered the economic outlook and debt ceiling negotiations dragged on.
The yield on the 2-year Treasury was last up by a basis point to trade at 4.331%, after briefly touching its highest level since March. The benchmark 10-year Treasury yield pulled back about 2 basis points to 3.701%, having also touched its highest level in more than two months.
Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.
Negotiations to iron out a deal continued Tuesday as the deadline to avert a default drew closer. Unless a resolution is struck, the U.S. risks defaulting on its debt as soon as June 1, Treasury Secretary Janet Yellen reiterated Monday. Some House Republicans challenged the validity of this forecast during a news conference Tuesday.
"The last thing we need is more confidence-destroying things like debt ceiling debates, when we're on the heels of banks going out of business, and the fear of upcoming recession," said Tim Lesko, managing director at Mariner Wealth Advisors. "It would just be nice to see some of these self-inflicted wounds get out of the way."
Uncertainty about the Fed's next interest moves persisted Tuesday. Fed officials in recent week have shared mixed views on what could be next for rates. These comments come after the Fed's latest rate decision and guidance sparked hopes among investors for a rate hike pause — or even cuts — later this year.