NEW YORK (Reuters) – Yields on U.S. Treasury bonds rose on Wednesday on cautious optimism that a deal to raise the government’s borrowing limit would soon be reached in Washington on expectations of more prolonged high rates.
* President Joe Biden will continue debt ceiling talks with congressional leaders into the end of the week, the White House said on Wednesday, while House Speaker Kevin McCarthy said he does not think the government will enter a payment moratorium.
* “We’re going to come together because there is no alternative,” Biden told reporters at the White House.
* Signs of progress in discussions contributed to a rise in bond yields, which tend to move inversely with prices, particularly at the short end of the curve.
* “In a risk-off scenario, if we were to go past date X without a deal, I think short-term Treasuries would probably bid well as part of a broader risk-off move in the markets.” said Calvin Norris of Aegon Asset Management.
* Investors, however, were nervous about the tight timetable for reaching a deal, given the federal government could run out of money to pay its bills as early as June 1.
* Yields on short-dated bonds, which more closely reflect interest rate expectations than long-dated bonds, were pushed higher by continued uncertainty over monetary policy, with a range of recent economic data for one The arguments in favor of higher rates have been strengthened. more time.
* Yields edged up slightly on Wednesday after a report reported an increase in US single-family homebuilding in April, despite last month’s data being revised down.
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* The yield on benchmark 10-year paper rose 3 basis points to 3.579%, while that on two-year notes rose 8 basis points to 4.154%.
* The Treasury auctioned $15 billion of 20-year bonds on Wednesday with a high yield of 3.954%.
