(Bloomberg) -- Treasuries slumped with yields trading at session peaks on Tuesday after two US government-debt auctions attracted tepid demand ahead of important inflation data due at the end of the week.    

Treasury yields rose across the curve, with longer-dated maturities climbing more than 7 basis points. Sentiment weakened after auctions of $69 billion of two-, and $70 billion of five-year notes drew limited interest, leaving dealers holding more debt than has been the case for recent sales. The lackluster results came after a report showed upbeat consumer confidence and amid hawkish signals from Federal Reserve officials. 

Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, highlighted the challenge of “thinner markets coming off the holiday, coupled with two auctions in one day” and said “the data we’ve had of late has been better on the margin.”

The Treasury sold five-year notes at a yield of 4.553%, more than 1 basis point above the pre-auction level of 4.54%. Heading into the sale, the five-year had erased early gains and that weak tone was still not able to provide enough of a concession to make for a smoother auction result. 

Earlier in the day, the first of Tuesday’s US government-debt auctions saw two-year notes sold at a yield of 4.917%, one basis point above the pre-auction level.

Dealers were left holding more than their usual shares of both auctions. The five-year sale left dealers with nearly 20%, above their recent average, while their stake of the two-year auction at around 17% was also a bit higher than the recent average.

“Like the 2-year note auction, the details of the 5-year note auction were soft,” with a “heavy dealer takedown,” and lighter demand as measured through the bid to cover, said John Brady, a managing director at RJ O’Brien.  

Longer-dated yields led the selling and the Treasury curve steepened, with the 30-year up 8.5 basis points, rising above 4.65%. The selling pressure intensified after a reading on May consumer confidence unexpectedly rose. It was the first increase in the measure in four months and the data and came amid fresh hawkish remarks from Fed officials.

Minneapolis Fed President Neel Kashkari said Tuesday that while the US central bank’s policy stance is restrictive, policymakers haven’t entirely ruled out additional rate increases.

Read more: Fed’s Kashkari Says Rate Hike Not Entirely Ruled Out

Treasury yields have bounced off of their mid-May lows, as relatively solid economic data has spurred Fed officials to quash hopes for near-term easing and reinforce the view that rates will be kept higher for longer.

The US two-year note at around 4.97% late Tuesday is near the upper end of this month’s 4.7% to 5.03% range as traders price in just one cut this year, with a nearly 70% possibility that it happens in November. 

Traders will likely focus on New York Fed President John Williams’ speech at the Economic Club of New York on Thursday. At the end of this week, the central bank enters its communications blackout ahead of its two-day policy meeting starting June 11.

This week’s coupon auction calendar will end with a $44 billion seven-year sale Wednesday. Once the debt sales are absorbed, the market will look to Friday’s release of the central bank’s preferred inflation gauge — the personal consumption expenditures index. Economists expect the PCE deflator to have risen in April at an annual pace of 2.7%, the same as in March. 

(Updates levels.)

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