Treasury Auctions and Inflation Data
The bond markets could be on the receiving end of a negative one-two punch this week. The bond market is very vulnerable in the short term with all the recent positive economic and employment data, in addition to some good news on the geopolitical front with the North Korea talks.
This week we get the Treasury auctions of 3-year, 10-year, and 30-year bonds, in addition to the monthly inflation data. I expect the Consumer Price Index, which will be released on Tuesday, to be in line with expectations of a 0.2% increase, which would bring the year-over-year increase in consumer prices to 2.2%. Any increase above consensus will likely be met with a push higher in yields.
The $62 billion auction of Treasury securities comes at a time when yields are at their highest levels in several years and markets face concerns about growing deficits. The demand for Treasury auctions has been waning in this environment, and that trend will most likely continue. I expect yields to continue to move higher in the near term.
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