T-yields rise after poor auction

US Treasury yields rose on Monday as durable goods orders data and pending home sales were surprisingly higher than expected. The sale of two- and five-year notes was weak as the market gauges the economy and Federal Reserve efforts to tame inflation.

The Treasury sold $97 billion in two- and five-year notes at a time when the quarter ends on Thursday and the market is grappling with how the Fed’s plans to aggressively hike interest rates will impact an economy that is showing signs of slowing.

The auction of $46 billion in two-year notes sold at a high-yield of 3.084%, while the $47 billion in five-year notes sold at a high-yield of 3.271%. Another $40 billion of seven-year notes will be sold on Tuesday, the last of the week’s auctions before the long Fourth of July holiday weekend.

The yield on the 30-year Treasury bond was up 4.6 basis points to 3.304%. A closely watched part of the Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 6.7 basis points.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.828%. The 10-year TIPS breakeven rate was last at 2.562%, indicating the market sees inflation averaging about 2.6% a year for the next decade.