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US Treasury yields fall across the whole curve due to concerns over an increase in global government debt supply, which sent yields rising last week, and retraced somewhat on expectations that Japan could begin issuing 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's Ministry of Finance sent a questionnaire to market participants on Monday asking for their views on issuance and the current market situation, according to Bloomberg.

The jump in yields in the long-end of the curve keeps the Japanese government worried, after the yield on 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, marking 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 of 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 rate changes, fell one and a half basis points.

The US 10-year Treasury note yield fell six bps to 4.448%, even though market participants remaining 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, as revealed by 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

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