U.S. Treasury yields eased a little on Tuesday after a reading of consumer confidence dropped to a six-month low and as the market looked ahead to the latest jobs data as a guide for future monetary policy moves by the Federal Reserve.
The benchmark 10-year yield was last down less than a basis point at 1.2768%. The Conference Board said on Tuesday its consumer confidence index dropped to a reading of 113.8 in August, the lowest since February, from 125.1 in July. Economists polled by Reuters had forecast the index falling to 124.0.
Ben Jeffery, an interest rate strategist at BMO Capital Markets, said it was "a data point that represents the influence of the rising pandemic uncertainty this month." With August ending on Tuesday, he said that month-end factors "should prevent any material rise in yields over the balance of the day."
All About the Jobs Numbers
Bill Merz, chief fixed income strategist at U.S. Bank Wealth Management, said the focus is on Friday's release of August employment data given that the Fed has "effectively proclaimed victory on the inflation side" and the Treasury market is implying investors believe that inflation will be around the Fed's target for some time.
"The jobs reports are going to be absolutely critical this month, next month, the following month, because that has so much influence over the path of the Fed's tapering and eventual [interest] rate hikes," he said.
In a speech to the annual Jackson Hole, Wyoming, economic conference on Friday, Fed Chair Jerome Powell said if job growth continues, the central bank could cut its $120 billion in monthly purchases of Treasuries and mortgage-backed securities this year. The five-year note yield, which is more sensitive to intermediate interest rate hikes, was last down less than a basis point at 0.766%.
A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last less than a basis point flatter at 107.14 basis points. (Reporting by Karen Pierog; editing by Jonathan Oatis)
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