Treasury Yields’ Decline Hits Three Days. What’s Behind It.

Bond yields are in retreat, driven by decisions made at two of the financial world’s most influential entities: the Federal Reserve and the U.S. Treasury.

The shift in yields matters for everyone from people investing in stocks to families seeking a mortgage to buy a home. Bond yields underpin mortgage rates, and lower yields on risk-free Treasury debt make stocks relatively more appealing. Larger auction sizes tend to raise yields because there is a perception that the government may have to offer bigger returns to encourage investors to purchase the debt. The fact that longer-dated issuance will be limited has therefore pushed yields lower.

Signs that the central bank is more comfortable with where interest rates are presently indicates to the market that rate hikes are less likely. The corollary is that a peak in yields may be around the corner.

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