Treasury Yields Fall Ahead of Federal Reserve Meeting
US Treasury yields fell on Monday as investors took advantage of higher rates in auctions ahead of this week's Federal Reserve meeting, where officials are expected to keep interest rates unchanged.
The two-year note auction attracted solid demand, while the five-year notes were sold at yields higher than expected, suggesting stronger demand for shorter-dated notes. The 10-year yield fell by around four basis points to 4.64%, down from its year-to-date peak last week.
Despite traders pricing in an unusually high amount of uncertainty about a potential hike in July, economists surveyed by Bloomberg expect the Fed to keep rates unchanged. Overnight-indexed swaps still implied a nearly 40% chance of a quarter-percentage-point rate increase this week, but traders are fully pricing in a hike by September.
Interest-rate strategists at Bank of America and JPMorgan Chase expect hawkishness from Fed officials will add upward pressure to yields. At Standard Chartered, US rates strategist John Davies warned that a return of the 10-year yield to around 5% couldn't be ruled out.