Treasuries and mortgage bonds are slightly lower this morning after negotiations over the debt ceiling stalled. The Treasury is scheduled to sell $35 billion of five-year debt today, the second of three auctions this week.
China’s central bank Tuesday raised interest rates for the first time in nearly three years. The People’s Bank of China said in a statement it will raise the one-year yuan lending rate to 5.56% from 5.31%, and the one-year yuan deposit rate to 2.5% from 2.25%. In other economic news, treasuries and mortgage bonds were down slightly from yesterday’s close amid speculation that more quantitative easing by the Fed will increase inflation.