U.S. Treasury yields declined on Monday as investors fretted over debt ceiling deal negotiations and assessed what could be next for Federal Reserve interest rate policy after mixed messages from officials.
At 6 a.m. ET, the 10-year Treasury
was trading more than 3 basis points lower at 3.659%. The yield on the 2-year Treasury
was last up by over 4.6 basis points to 4.243%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Talks about a debt ceiling deal are set to continue Monday, with President Joe Biden and House Speaker Kevin McCarthy expected to meet for negotiations. If a resolution is not found, the U.S. risks defaulting on its debt as soon as June 1.
Talks stalled late on Saturday as the two sides struggled to come to an agreement. On Sunday, Biden called for the Republicans to “move from their extreme position”, while McCarthy told reporters that Biden needed to “get away from the socialist wing of the Democratic party and represent America.”
They would both need to compromise to reach a deal, McCarthy added.
Investors also weighed the outlook for central bank interest rate policy after Fed officials gave mixed messages about whether rate hikes should be halted last week.
On Friday, Fed Chairman Jerome Powell said inflation was still too high, but interest rates may not have to go as high as previously expected to curb it, owing to recent banking sector turmoil.
More central bank speakers are due to speak Monday ahead of the release of minutes from the Fed’s last meeting on Wednesday.
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