US yields rise amid increased Treasury supply, still-imminent Gaza attack
Treasury yields edged higher on Monday as investors faced increased U.S. government debt issuance while an expected Israeli ground offensive in Gaza remained imminent, keeping the bond market in a tentative mood.
Israeli forces kept up their bombardment of Gaza after diplomatic efforts to arrange a ceasefire to allow foreign passport holders to leave and aid to be brought into the besieged Palestinian enclave failed.
Air strikes were the heaviest yet as the conflict entered its 10th day with an Israeli ground offensive of the densely populated coastal strip believed to be close at hand.
«It's certainly wait-and-see mode.
The fact that there wasn't a rally so far (Monday) morning in bonds, we didn't really see much of a kind of flight to safety,» said Will Compernolle, macro strategist at FHN Financial in New York.
Increased Treasury supply, the acknowledgment that the Federal Reserve will keep interest rates higher for longer and the fact the stock market is performing well are pushing yields higher, Compernolle said.
«Those risky assets are staying pretty steady even in the face of higher returns on bonds,» Compernolle added. «The idea of a 5% yield sounds really good but no one wants to add duration to their balance sheet even if a bank has cash to buy more bonds.»
The yield on 10-year Treasury notes rose 8.9 basis points to 4.719%, while the two-year yield, which reflects interest rate expectations, was up 4.2 basis points at 5.096%.
Normal bidding is not being seen from many of the big buyers, such as banks, because they remain cautious that interest rates might go higher, Compernolle said.
«You don't see the bids for these bonds that would be consistent with the fundamentals because a lot of the big buyers
