A $30 billion sale of two-year Treasuries today will result in the highest yield in three years, according to pre-auction trading, amid speculation the Federal Reserve is moving closer to raising interest rates.
A gauge of expectations for consumer prices during the next 10 years was near the most in five months before Fed officials speak this week with markets indicating a 59 percent chance they will boost interest rates by July next year. Economists say a report on Thursday will show the central bank’s preferred measure of inflation, the personal consumption expenditures price index, rose to the highest since October 2012. The U.S. is selling $107 billion of coupon-bearing debt this week.
“The auctions this week are going to add pressure to the front end of the curve,” said Shirley Tsai, a bond trader at Hontai Life Insurance Co. in Taipei “This week, the core PCE is going to be released and we expect this data to go higher. We also expect the 10-year break-even rate to go higher gradually.”