NEW YORK: Bond investors, who have been on edge over signs of growing inflation and a possibly more aggressive Federal Reserve, will have their work cut out for them as the US government seeks to sell $258 billion worth of debt this coming week.
The Treasury Department began ramping up its debt issuance earlier this month to fund the expected growth in borrowing tied to the biggest tax overhaul in 30 years and a two-year federal spending package.
Last year’s tax reform is expected to add as much as $1.5 trillion to the federal debt load, while the budget agreement would increase government spending by almost $300 billion over the next two years.
Analysts worry the combination of a rising budget deficit, faster inflation and more Fed rate increases have ratcheted up the risk of owning Treasuries.
Those concerns pushed benchmark 10-year Treasury yields up to 2.944 per cent, a four-year peak last week, data showed.
Treasury bill and two-year yields have reached their highest level in more than nine years.
The five-year Treasury yield is hovering at its highest levels in nearly eight years, while seven-year yield climbed to levels not seen since April 2011.
The increase in US yields may entice investors seeking steady income in the wake of the rollercoaster sessions on Wall Street and other stock markets this month, analysts said.
“While the rise in yields could draw additional demand, investors
have remained very picky on where they decide to buy front-end rates,” TD Securities strategists wrote in a note.
“We therefore look for relatively cautions demand at this week’s auction series even as we view the 2-year part of the curve as relatively attractive,” they added. — Reuters
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