U.S. Treasury yields declined on Tuesday as investors looked to the release of minutes from the Federal Reserve’s latest meeting and assessed the state of the economy.
At 3:42 a.m. ET, the yield on the 10-year Treasury was around two basis points lower at 4.4023%. The 2-year Treasury yield was last at 4.9085 after dipping by less than one basis point.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Treasury yields fell after an auction of 20-year Treasury notes worth a total of $16 billion that saw slightly higher than average demand on Monday.
Meanwhile, investors assessed the state of the economy and considered what could be on the horizon for Federal Reserve monetary policy, especially regarding interest rates.
Minutes from the central bank’s latest meeting that concluded with interest rates being left unchanged and Fed Chairman Jerome Powell suggesting that rates could go higher still and rate cuts were not being discussed yet, are due Tuesday.
But since that meeting, markets have all but erased any expectations of further rate hikes as several economic data points, including October’s consumer price index, have pointed to inflation slowing.
Markets are pricing in a more than 99% chance of rates being left unchanged for the third time in a row when the Fed meets in December, according to CME Group’s FedWatch tool.
Questions about when the Fed may start cutting rates and if a recession is likely to hit the U.S. economy have instead grown louder among investors. Many are hoping that the minutes will shed some light on the expected path.
Also on Tuesday, existing home sales data for October is due.