Government notes maturing in two years are set to be auctioned on Tuesday. It will be a test for demand as yields have come down dramatically.
The Treasury Department is set to auction $69 billion worth of 2-year notes at 1 p.m. Eastern on Tuesday. Government auctions have seen increased interest lately as U.S. assets are getting sold off, with many speculating the pressure is coming from foreign selling. The 2-year note, though, is unique–it’s strongly correlated with interest rates. President Donald Trump’s calls for the Federal Reserve to lower rates has made 2-years more attractive as investors look to lock in yields before they potentially fall with interest-rate cuts.
“The supply event comes at a distinctive moment in which Fed independence has become the most topical discussion among market participants,” wrote Ian Lyngen, head of rates strategy at BMO Capital Markets. “We suspect that the specter of deep rate cuts this year will translate to a solid baseline of end-user demand for the new 2-year notes.”