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U.S. Treasury yields rose again on Wednesday as investors considered the state of the economy and digested a poor five-year note auction.
The 10-year Treasury yield rose more than 3 basis points to 4.578%, holding above the 4.5% it initially breached on Tuesday. The 2-year Treasury yield also rose more than 1 basis point to 4.97%.
The U.S. Treasury Department auctioned $70 billion worth of five-year notes on Tuesday, but demand was sluggish, causing yields to rise. The bid-to-cover ratio, a key indicator of demand, was 2.3, below the average of 2.45 in 10 auctions.
Investors also assessed the state of the economy and looked ahead to fresh economic data later this week that could influence Federal Reserve policy making.
That includes Friday’s release of the personal consumption expenditures price index, the Fed’s preferred inflation gauge. In addition, several Fed officials are scheduled to make statements this week that investors will be watching closely for new clues about the future path of interest rates.
Minneapolis Fed President Neel Kashkari told CNBC on Tuesday that he is looking for “a few more months of positive inflation data” before he feels comfortable cutting rates.
In recent weeks, Fed officials have generally said they need to be patient in cutting interest rates as they wait for economic data to show that inflation will return to the central bank’s 2% target on a sustained basis in order to increase policy flexibility further.
The minutes of the central bank’s latest meeting released last week also showed the Fed’s uncertainty about the prospects for rate cuts.
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