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BOND REPORT : Treasury Yields Rise As Investors Brace For ECB Policy Decision

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09/11/2019 | 04:13pm EDT

By Sunny Oh

U.S. Treasury Department sold $24 billion of 10-year notes

U.S. Treasury yields edged higher Wednesday, extending the steep selloff in the past two days, as investors prepared for a key European Central Bank meeting on Thursday.

What are Treasurys doing?

The 10-year Treasury note yield was up 2.8 basis points to 1.733%, its highest level since Aug. 6. The two-year note rate was virtually unchanged at 1.670%, while the 30-year bond yield rose 2.4 basis points to 2.208%, its highest since Aug. 9.

What's driving Treasurys?

Investors are eyeing the ECB's meeting on Thursday, when policy makers are expected to agree to some stimulus measures. It's unclear, however, if the ECB can launch an aggressive stimulus package amid criticism within its own ranks over the efficacy of negative rates.

Growing doubts about whether the ECB will be as dovish as once expected by investors have undermined appetite for long-term European and U.S. government paper in the past few sessions, helping to arrest the sharp plunge in global bond yields.

Check out: The ECB decision is coming -- here's what to expect

The German 10-year government bond yield has backed up to negative-0.56%, after trading as low as negative-0.72% last week.

In economic data, U.S. producer prices for August were up 0.1%. The more widely-watched consumer price gauge will come out Thursday, with economists polled by MarketWatch anticipating an increase of 0.1% last month.

The U.S. Treasury Department auctioned off $24 billion of 10-year notes, but didn't stir trading in the bond market.

What did market participants say?

"Market expectations are quite high ahead of the [ECB] meeting for a full stimulus package," said Franck Dixmier, global head of fixed income at Allianz Global Investors, in an interview.

But the prospect for disappointment runs high because of the lack of agreement within the central bank over the need for further asset purchases from the central bank. Dixmier pointed that ECB policymaker François Villeroy de Galhau questioned calls for an immediate resumption of bond-buying.

"There's absolutely no consensus at the bank," said Dixmier.

Stocks mentioned in the article
ChangeLast1st jan.
ALLIANZ SE -0.29% 209.7 Delayed Quote.20.08%
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