U.S Treasuries steady on subdued trade

The U.S. Treasuries were little changed on Tuesday during a relatively quiet session that saw little data of much significance. Moreover, Markets now look ahead to new home sales data on, followed later by a 2-Year Note auction later in the session. The yield on the benchmark 10-year Treasury note hovered at 1.842 pct and the yield on the short-term 2-year bonds also remained unchanged at 0.909 percent by 1040 GMT.

The April Commerce Department new home sales report to be released on Tuesday, 24 May (1400 GMT). New home sales were weak for much of 2015 and are expected to remain constrained in 2016, continuing to face supply dislocation (related to foreclosure activity) and generally subdued conditions. Alongside the broader decline seen in the series, further downward pressure (on a monthly basis) will likely be seen in the months to come. However, anticipating modest upward pressure in April, we expect new home sales will increase to around 525k.

Moreover, the U.S bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Federal Reserve's target. Crude oil prices fell on firm global supply, a stronger dollar and surging output from Iran to Europe and Asia. Yesterday, Iranian deputy oil minister quoted that Iran plans to increase oil export capacity to 2.2 million barrels by the summer and has no plans to freeze its level of oil production and export. The International benchmark Brent futures fell 0.85 percent to $47.94 and West Texas Intermediate (WTI) dipped 0.62 percent to $47.78 by 0830 GMT.

The Federal Reserve of Philadelphia President Harker said that June rate hike is appropriate unless data shows the US economy is falling off track and he sees 2, 3 rate hikes in 2016. He expects inflation to return to 2 percent sometime in 2017. Said "Brexit" would be a consideration in policy but not fundamental to the US economy. Says risks to US economy related to China economy receded.

Markets now look ahead to a lighter flow of data in the week ahead, highlighted by durable goods orders on Thursday, followed by retails sales (1400 GMT), GDP and University of Michigan consumer sentiment on Friday. Additionally, markets receive 2-Year Note, 5-Year Note and 7-Year Note auctions on Tuesday, Wednesday and Thursday, respectively.