FX.co ★ Treasuries Move Modestly Higher, Extending Upward Trend

Treasuries continued to trend upwards for several sessions, making modest gains during Tuesday's trading. Despite an early advance, bond prices retraced slightly, but still stayed in the positive territory. Consequently, the benchmark ten-year note's yield, which inversely correlates with its price, fell by 2.6 basis points to 4.463 percent.

The ten-year yield's closing level was the lowest in nearly a month, marking its fifth consecutive session of decline. The sustained upward trajectory of treasuries was spurred by renewed optimism regarding the future of interest rates.

Indications toward a more dovish stance from Federal Reserve Chair Jerome Powell and weaker-than-anticipated job growth in April have largely quelled concerns about a potential rate hike by the Fed. Investors have grown increasingly positive about a rate decrease in the upcoming months. This includes a current 81.5 percent chance of lower rates by September, based on data from the CME Group's FedWatch Tool.

However, afternoon trading saw bond prices losing some ground after an assertion by Minneapolis Federal Reserve President Neel Kashkari suggested that interest rates might need to stay at their current levels for an extended duration.

"I would require multiple positive inflation readings indicating that the disinflation process is on course before considering rate cuts," Kashkari stated at the Milken Institute 2024 Global Conference.

He also didn't rule out the possibility of the Fed hiking rates in the future, noting that while the threshold for such a move is quite high, it isn't limitless.

In the coming days, the Treasury is set to announce the results of this month's auctions of ten-year notes estimated to be worth $42 billion.