Although the move was in line with the BoJ's planned reduction in bond buying, it highlights the sensitivity of markets to global monetary policy. "We don't necessarily see this as a signal of impending policy change, but investors are very sensitive to the overall monetary policy backdrop, especially out of the major central banks," said John Briggs, head of Americas strategy at NatWest Markets in Stamford, Connecticut.
Tuesday's upward pressure on yields may in part be a response to corporate debt supply. Sempra Energy and Athene Holding Ltd were among companies selling new debt on Tuesday, after $9.05 billion in US high-grade bonds reached the market on Monday, according to Thomson Reuters' IFR. "There's a lot of investment-grade corporate supply that is normally expected in January, and we're seeing some of that come through this week," said Priya Misra, head of global rates strategy at TD Securities in New York. "More duration hitting the market is what's resulting in this bear steepening move."
Lifetime records set by the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite may also be contributing to the sell-off in Treasuries. Yields on 3-year notes rose to their highest since 2007 ahead of the US Treasury Department's sale of $24 billion in new supply. The auction did little to move yields, which hovered around the record number. The US Treasury Department on Tuesday sold the 3-year government notes at a yield of 2.080 percent, the highest at an auction for this debt maturity since May 2007, Treasury data showed.
The United States is selling $56 billion in new supply this week, with 10-year notes on Wednesday and 30-year bonds on Thursday. The US 10-year note yielded 2.546 percent at 2:50 pm EST (1950 GMT), the highest since March 15. The 3-year note yield, which is sensitive to traders' views on Fed policy, was 2.074 percent at 2:53 pm EST (1953 GMT), its highest since the instrument was reissued in 2007.