Treasury Traders Eye Supply-Demand Risks With Yields Near Lows
- Fed moving toward taper, while Treasury likely to cut supply
- Upcoming week includes quarterly refunding and U.S. jobs data
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The timing of major upcoming shifts in Treasury supply and demand will be crucial in determining if the recent downward trend in yields continues or finally reverses.
The 10-year yield dropped 25 basis points in July, its biggest one-month fall since the pandemic panic rocked markets back in March 2020, and a fourth straight period of declines. Commentary from the Federal Reserve accompanying its most recent policy decision last week helped reinforce the idea among some observers that it’s in no huge hurry to withdraw policy support, adding to downward pressure on yields even as inflation ticks up.