The 10-year Treasury yield fell for the first time since May 7 to 1.5% as traders appeared to continue an unwind of short positions.
The benchmark is retreated before the auction of notes at the tenor and fell to as much as 4 basis points to 1.494% and ahead of key inflation data on Thursday.
There was no clear catalyst for the recent decline, suggesting a potential shift from the market's large short market before the American data and Thursday's European Central Bank meeting.
Positioning for higher yields based on expectations for an economic recovery has been unprofitable over the past two months. The 10-year yield increased in March at about 1.77% and fell on 7 May 1.46% after the release of weaker-than-the-stock estimates.
The drop in yields, which has come in the face of signs that the Federal Reserve is moving toward reducing its asset purchases, comes before a policy meeting next week. The market must to navigate the May Consumer Price Index before it can be accelerated by economics.
I don't think even a slightly stronger number changes the narrative too much for the June Fed meeting, which is one where they start to talk about tapering, wrote NatWest Markets strategist John Briggs in a note this week about the upcoming data.
The drop in yields is not confined to the U.S., with those in Germany the most negative in a month.
'The markets appear remarkably robust, said ING strategists including Antoine Bouvet. 'It is clear that the market is pricing in the lengthening of the ECB's pandemic asset buying rate as a base case: the ECB's accelerated bond-buying program targets around 20 billion euro a week.
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