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Bond Report: Treasury yields rise as traders return from Three-day U.S. vacation weekend

Treasurys weakened early Tuesday, pushing up yields, as investors returned from a three-day U.S. holiday weekend.

What yields are doing

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.294%
was at 3.276%, up from 3.238% at 3 p.m. Eastern on Friday.

The 2-year Treasury note yield
TMUBMUSD02Y,
3.228%
was 3.207%, compared with 3.164% Friday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.366%
traded up to 3.343% versus 3.293% late Friday.

What’s driving the market

Most U.S. financial markets were closed Monday for the Juneteenth holiday, after yields on Friday logged a third straight weekly rise, but ended off multi-year highs set earlier in the week.

The Federal Reserve last week hiked its benchmark interest rate by 75 basis points, or three-quarters of a percentage point, its largest such move since 1994, while Chair Jerome Powell said a 75 or 50 basis point move could occur in July. Other major central banks, with the exception of the Bank of Japan, have also moved or prepared to tighten monetary policy in response to surging inflation pressures.

Powell will testify before Congress on Wednesday and Thursday this week as he provides lawmakers with semi-annual updates on monetary policy.

Fears that monetary tightening will cause a recession have mounted as central banks have grown more aggressive, contributing to sharp losses for equities last week. U.S. stocks were bouncing on Tuesday, however, with futures pointing to a higher start for U.S. equities.

Read: Here’s why Larry Summers wants 10 million people to lose their job

What analysts are saying

“Nothing much has changed since last week surrounding expectations about central bank tightening or signs that inflationary pressures may be moderating,” said Raffi Boyadjian, lead investment analyst at XM, in a note. Recession is still the foremost concern for investors, so this week’s rebound in equity markets looks more like a technical correction following the heavy selling over the course of the previous two weeks.”

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