10-year Treasury yield sees biggest jump in four weeks as Fed meeting gets underway

What’s driving Treasurys?

Yields rose after a solid $62 billion sale of 7-year notes, the last U.S. Treasury debt auction of the week. A poor showing for sales of this maturity provided the spark for a sharp bond-market selloff back in late February that sent the 10-year Treasury note yield above 1.60% for the first time in a year.

But analysts said the new supply did not appear to be the tinder that helped set off the afternoon weakness in government bonds on Tuesday.

Instead, investors may have been positioning ahead of the Fed’s policy update due on Wednesday even though most analysts are not expecting a change in tone or any major policy decision.

The Bank of Japan said that it expected inflation would fail to reach the central bank’s 2% target until 2024 as the coronavirus pandemic intensified. The BOJ also said it would be willing to extend its pandemic relief program beyond the September deadline.

In U.S. economic data, the index of consumer confidence climbed to a 14-month high of 121.7 this month from a revised 109 in the prior month, the Conference Board said Tuesday. 

The index of home prices across 20 large cities increased at yearly pace of 11.9% in February, according to the S&P CoreLogic Case-Shiller home price index. On a monthly basis, home prices were up 1.2%.

What did market participants say?

“The Fed have done everything they could possibly can to say the data is getting better, but that they’ll be extraordinarily patient,” said said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in an interview.

“We’ve gone everywhere, but we’ve really gone nowhere. Absolute levels are mostly unchanged from the March 17th date,” said Faranello.