- Democratic leaders hope to get their coronavirus relief spending plan through the House of Representatives as soon as Tuesday.
- Auctions will be held Tuesday for $30 billion of 42-day bills and $58 billion of 3-year notes.
The 10-year Treasury yield fell away from the 1.6% level on Tuesday, as the rally in yields appeared to take a pause after a sharp run up that ratted the equity market.
Tuesday's weakness in yields comes as after a sharp run up for the benchmark 10-year yield sent ripples through the equity market, as tech stocks with high valuations have come under pressure in recent weeks. The 10-year has traded near 1.6% over the past week after starting the calendar year below 1%.
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"Treasuries rallied overnight, retracing much of Monday's weakness in a move that lacks any obvious trigger aside from the selloff relenting under its own weight," Ian Lyngen of BMO Capital Markets said in a note.
Strategists and traders have attributed the unusually rapid jump to growing optimism about a post-pandemic economic recovery, trillions in government stimulus and budding concerns about inflation.
Federal Reserve officials, including Chair Jerome Powell, have repeatedly stressed that they aren't considering hiking interest rates to head off inflation and so far haven't signaled that changes to their asset purchase plan, such as "Operation Twist," is imminent.
Futures contracts for the tech heavy Nasdaq 100 rose on Tuesday, signaling that the rebound in bond prices may be mirrored by a bounce for tech stocks.
The pullback for yields on Tuesday came as as investors watched for the final passage of the Democrats' $1.9 trillion stimulus package in Congress.
The House of Representatives is aiming to approve the coronavirus relief spending packaged so that President Joe Biden can sign it before key unemployment programs expire on Sunday. Democratic leaders hope to get their stimulus package through the chamber as soon as Tuesday.
The bill extends a $300 per week boost to unemployment benefits through Sept. 6 and sends direct payments of up to $1,400 to most Americans.
Auctions were held Tuesday for $30 billion of 42-day bills and $58 billion of 3-year notes, with the auction for the longer-dated Treasury's characterized as strong by Wall Street strategists.
"Today's great auction certainly reflects faith that the Fed won't be raising rates in the coming years notwithstanding what will be extraordinary pressure to do so from the market," Peter Boockvar from Bleakley Advisory Group said in a note.
— CNBC's Jacob Pramuk and Yun Li contributed to this report.