U.S. Treasury yields edged higher in Asian trading, reversing the decline in long-end yields the previous day, prompted by weak housing data.
The 10-year Treasury yield last traded 1.5 basis points higher at 5.131% on Wednesday, while the 30-year yield increased 1.6 basis points to 5.440%, according to Tradeweb.
Treasury yields continue to hover comfortably below their recent multidecade highs as investors scale back some of the their expectations for the Federal Reserve's rate path. Money markets price in a high 85% probability of unchanged interest rates at the Fed's Oct. 28 decision, although three hikes are fully discounted over the next 12 months, according to LSEG.
Still, Treasury yields remain at levels that look attractive for medium-term investors, analysts said.
"For medium-term investors, current yield levels offer attractive carry and a favorable asymmetry in expected returns," with positive outcomes outweighing negative ones, said Luca Cazzulani, head of strategy at the Investment Institute by UniCredit.
A further 50 basis-point increase in yields, pushing the 10-year Treasury yield to around 5.60%, would still generate a positive one-year total return of roughly 2%, while a 50 basis-point decline to around 4.60% would deliver a return close to 9%, he said in a note.
Investors with a shorter investment horizon, however, should maintain a cautious stance on duration risk given still-elevated rate volatility, Cazzulani said.
Wednesday's events to watch for Treasury investors include a $13 billion auction of 20-year bonds.
JPMorgan strategists deem the macro backdrop unattractive, valuations rich and technicals unsupportive ahead of the auction.
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