U.S. Treasury yields climbed on Tuesday morning, ahead of the Federal Reserve’s two-day policy meeting, due to kick off later in the day.
The central bank is not expected to announce any changes to its policy but investors will be keeping a close eye on comments from Fed Chairman Jerome Powell, in a press conference following the meeting on Wednesday afternoon.
Bill Merz, head of fixed-income research at U.S. Bank Wealth Management said in a note on Monday that while the Fed was unlikely to take any action in this meeting, “an improving outlook on growth and inflation could put upward pressure on yields.”
“Clarity and confidence about the Fed’s expectations for the timing of future rate hikes could also spark yield volatility, since the market is already doubting Fed forecasts,” he said.
He pointed out that the market is pricing in an interest rate hike from late 2022, sooner than the Fed’s projection of 2024.
Meanwhile, February’s S&P/Case-Shiller home price index is due out at 9 a.m. ET.
Auctions will be held Tuesday for $40 billion of 42-day bills, $62 billion of 7-year notes and $28 billion of 2-year floating-rate notes.