Treasuries See Further Downside Amid Focus On The Fed

Treasuries moved notably lower during trading on Tuesday, extending the downturn seen over the course of the previous session.

Bond prices came under pressure early in the session and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.5 basis points to 3.912 percent.

The weakness among treasuries came as traders continued to look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

Since the Fed is widely expected to raise interest rates by another 25 basis points, traders will be focused on the accompanying statement for clues about the outlook for interest rates.

Traders are optimistic the rate hike will be the last following recent encouraging inflation data, but the Fed may not offer as much confirmation as they hope.

“They will probably signal that they want to see the impact of the current tightening cycle and that they will probably skip raising rates in September,” Edward Moya, senior market analyst at OANDA, said of the Fed. “They will likely be clear in suggesting that more tightening could very well happen.”

A report from the Conference Board showing U.S. consumer confidence improved by much more than expected in the month of July may also have reduced the safe-haven appeal of bonds.

The Conference Board said its consumer confidence index jumped to 117.0 in July from an upwardly revised 110.1 in June. Economists had expected the index to climb to 111.8 from the 109.7 originally reported for the previous month.

With the much bigger than expected surge, the consumer confidence index reached its highest level since July 2021.

Trading activity on Wednesday may be somewhat subdued ahead of the Fed’s afternoon monetary policy decision, although a report on new home sales may attract some attention.

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