Bond Report: 10-year Treasury yield slips to around 1.60% ahead of Fed’s Beige Book

U.S. government debt yields on Wednesday retreated slightly, with investors watching reports of a coming corporate debt issue from Saudi Aramco and an anecdotal gauge of the health of the U.S. economy from the Federal Reserve, the Beige Book, due at 2 p.m. Eastern Time.

How Treasurys are performing
  • The 10-year Treasury note

    was yielding 1.600%, compared with 1.613% a day ago at 3 p.m. Eastern on Tuesday.
  • The 30-year Treasury
    known as the long bond, was yielding at 2.282%, versus 2.296%.
  • The 2-year Treasury note yield

    was at 0.149%, from 0.147%.
Fixed-income market drivers

U.S. Treasury yields slipped ahead of the Fed’s Beige Book, which will offer an anecdotal account on business conditions in the Fed’s districts in the aftermath of the pandemic as concerns about supply chain bottlenecks have intensified.

On Wednesday, investors will likely focus on a speech from Philadelphia Fed President Patrick Harker on the economic outlook to Women in Housing and Finance at noon Eastern. Separately, Chicago Fed President Evans, Atlanta Fed President Bostic and Dallas Fed President Kaplan will discuss the impact of racism and the economy at 2 p.m. Eastern.

On Tuesday, Randal Quarles, the Fed’s vice chair for supervision, during an interview with Politico, said that the recent rise in inflation should prove transitory, according to a Reuters report. Fed Gov. Lael Brainard offered a similar message during a speech to the Economic Club of New York,

Fixed-income investors also were watching reports that energy giant Saudi Aramco was preparing a massive bond offering to fund a $75 billion dividend commitment, Bloomberg reported.

The offering could kick off sometime in June and could impact Treasury yields, which tend to be sensitive to major corporate offerings as fixed-income dealers and prospective investors adjust their portfolios.

What rates strategists are saying

“We’re encouraged to see the holding pattern in US rates persist as Friday’s employment report approaches—in part because the ability of 10-year yields to remain closer to 1.50% than 1.75% speaks to a bullish underpinning that we anticipate will become of increasingly relevant as the summer unfolds,” wrote BMO Capital Markets strategists Ian Lyngen and Ben Jeffery in a daily note.

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