U.S. Yields Rally as Investors Eye Inflation Report

U.S. government bond prices continued their decline, driving yields up, as investors looked forward to the coming inflation report that could reaffirm the bearish sentiment on Treasury bonds.

The 10-year Treasury note yield advanced 2.7 basis points to 2.857 percent, but retreated from a four-year peak of 2.891 percent hit earlier in the day.

The 30-year bond rate was almost unchanged at 3.138 percent but reached its highest level since March 2017, according to WSJ Market Data Group. Meanwhile, the two-year note yield recorded a gain of 1.7 basis points to 2.077 percent.

Bond markets experienced selling pressure as a mixture of inflation worries, increasing budget deficits and the Federal Reserve's move to unwind its balance sheet have affected the demand for U.S. government bonds. Treasury issuance is expected to increase at the same time the U.S. government can no longer depend on a price-insensitive Fed to absorb the coming supply.

Higher rates were said to be the cause of a deep correction that sent stocks plunging. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite Index traded down over 5 percent in the previous week. Stocks look less attractive on several valuation indicators if the benchmark 10-year yield rises to high.

However, stocks rallied on Monday to record back-to-back increases, with the Dow rising over 400 points.

Investors are now expected to focus on the consumer-price index report on Wednesday, a possible turning point as investors faulted the strong reading on the wage index of the January jobs report as the main reason for the market turmoil.

News are provided by InstaForex