US yields slide as Japan's signal shift in debt strategy

• US 10-year yield drops 6 bps to 4.448% as bond auctions attract strong demand.
• Japan's Ministry of Finance surveys market amid concern over long-end yield spikes.
• Market eyes $70B five-year and $44B seven-year note auctions later this week.

US Treasury yields fall across the whole curve due to concerns over an increase in rising global government debt supply, which sent yields rising last week, retraced somewhat on expectations that Japan could begin to issue short-term debt.

Treasury yields retreat as Japan mulls debt issuance changes; solid two-year auction calms supply-driven rate jitters

Global yields were pressured as Japan as the Ministry of Finance sent a questionnaire to market participants on Monday evening that asked for their views on issuance and the current market situation, according to Bloomberg.

The jump on yields in the long-end of the curve, keeps the Japanese government worried, after the yield in 20-year notes reached historical highs last week.

Debt auctions of US Treasuries were well received by market participants. According to Reuters, "The two-year auction hit a high yield of 3.955%, about nine basis points below the market at the time of the bidding deadline."

The US Treasury sold $69 billion in two-year notes, the first of three auctions this week. Further auctions lie ahead, with the Treasury projected to issue $70 billion of five-year notes and $44 billion on seven-year notes, due respectively on Wednesday and Thursday.

In the meantime, yields on US debt retreated considerably on Tuesday. The US 2-year T-note yield, the most sensitive to interest rates changes, fell one and a half basis points (bps= to 3.977%.

The US 10-year Treasury note yield fell six bps down to 4.448%, even though market participants remain skeptical that the Federal Reserve would lower rates in the first half of the year. The first-rate cut is expected for September, after the Jackson Hole Symposium in August.

US Consumer Confidence data improved in May, revealed the Conference Board (CB). Durable Goods Orders in April plunged -6.3% MoM following a rise of 7.6% in March.

US 10-year yield vs. Fed funds rate December 2025 easing expectations