Treasury yields shrug off stock-market rally ahead of Fed meeting

U.S. Treasury yields struggled for direction Monday as investors looked past the buoyant tone in risk assets and waited for the Federal Reserve meeting this week.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.679% was virtually unchanged at 0.669%, while the 2-year note rate TMUBMUSD02Y, 0.137% edged 0.6 basis point higher to 0.135%. The 30-year bond yield TMUBMUSD30Y, 1.421% fell 0.9 basis point to 1.409%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Global equity markets finished sharply higher Monday, with the S&P 500 SPX, +1.27% and Dow Jones Industrial Average DJIA, +1.18% taking back a chunk of last week’s losses. But the optimism around risk assets didn’t appear to weigh on appetite for safe-haven assets like government paper, with investors mostly focused on the coming Fed meeting.

Analysts say the policy gathering could offer clues on how the central bank sees the economic outlook, following a sharp decline in the unemployment rate in August.

Analysts are also hoping for more clarity on the central bank’s new framework of average-inflation targeting, which aims for a sustained overshoot of inflation over 2% before the Fed contemplates tightening financial conditions.

The policy-setting Federal Open Market Committee kicks off its two-day meeting on Tuesday.

Read: Here’s why markets shouldn’t overlook the Fed meeting next Wednesday

What did market participants say?

“The market will want to know the Fed’s upper bound on its inflation target and exactly what the triggers are going to be,” said Dec Mullarkey, managing director of investing strategy at SLC Management, in an interview.