Bond Report: 10-year Treasury yield extends climb after biggest daily rise in two months

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U.S. Treasury yields rose on early Wednesday’s trade, extending the surge in bond yields in the past few sessions after a stronger than expected rise consumer prices and ahead of a key auction for government paper.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.688% rose 2.7 basis points to 0.685%, a day after it recorded its biggest daily increase in two months, while the 2-year note rate TMUBMUSD02Y, 0.156% held steady at 0.157%. The 30-year bond yield TMUBMUSD30Y, 1.379% added 3.2 basis points to 1.378%. Bond prices move inversely to yields.

What’s driving Treasurys?

Yields extended their rise after the July U.S. consumer-price index rose 0.6% versus expectations for a rise of 0.4%.

Treasury prices remained under pressure as investors made way for the increased debt issuance this week. The Treasury Department will sell a record $38 billion of its benchmark 10-year notes in the afternoon, influencing trading for government bonds.

What did market participants’ say?

“For the 10-year auction, we believe this will be a test for the market with the substantially larger auction size,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald.

“Overall, we expect decent demand from both domestic and overseas accounts as the issue has retreated from its attempt to break through 50 basis points and back to its highest yield since early July,” said Lederer.