The 10-year Treasury yield rose following a less-than-stellar $42 billion auction of new securities by the Treasury Department.
The benchmark 10-year note yield was up more than 2 basis points to 4.22%, while the 30-year Treasury bond yield climbed more than 4 basis points to 4.813%. One basis point equals 0.01% and yields and prices move in opposite directions.
Fixed income strategists at RBC Capital characterized the 1 p.m. ET auction results as “soft” with non-dealers of Treasury debt taking somewhat less than the recent average, while the bid-to-cover ratio — a measure of investor demand — dropped to 2.35x from a recent average of 2.51x. “Since the results, Treasuries have cheapened in the follow-through,” RBC said.
The rise in yields come after the prices portion of a key service sector survey for July was stronger than expected when reported on Tuesday, and as investors continue to weigh developments tied to President Donald Trump’s tariff policy.
The ISM non-manufacturing purchasing managers’ index fell to 50.1 in July, below the 51.2 that had been expected by economists polled by Dow Jones ahead of the survey, and below the 50.8 reading in June.
The prices paid index within the service survey rose, however, by 2.4 points to 69.9. New export orders fell 3.2 points to 47.9, imports tumbled 5.8 points to 45.9 and the employment index slipped further into a contraction, falling 0.8 point to 46.4.
Deutsche Bank analysts said the ISM data was “worrisome.” They added that it “raised renewed concerns that tariffs were pushing the U.S. economy in a more stagflationary direction, complicating the Fed’s job in the process.”
Traders are following speeches scheduled Wednesday by Federal Reserve officials, including Boston Fed President Susan Collins and San Francisco Fed President Mary Daly.
Correction: The Treasury Department will auction $25 billion in 30-year bonds on Thursday. A previous version misstated the date.
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