By Ellie Ismailidou, MarketWatch

Investors brace for earnings, new bond sales

Treasury yields turned lower on Tuesday after the International Monetary Fund trimmed its global-growth forecast citing the effect of declining commodity prices and increasing financial market volatility on emerging markets.

Earlier in the day, yields had risen for a second trading session, as investors braced for the beginning of quarterly earnings along with a flurry of new Treasury and corporate bond sales.

But yields turned lower while the stock market's rally fizzled, (http://www.marketwatch.com/story/us-stock-futures-slip-after-rally-as-earnings-season-looms-2015-10-06) as the IMF's report came on the heels of a Commerce Department report early Tuesday morning, which said U.S. exports dropped to their lowest level in three years (http://www.marketwatch.com/story/us-trade-deficit-leaps-16-in-august-to-483-billion-2015-10-06) leading the trade deficit to jump more than what economists had anticipated.

On balance, the yield on the benchmark 10-year Treasury note traded 1.4 basis points down on the day to 2.069% Tuesday afternoon, according to Tradeweb. One basis point is equal to one hundredth of a percentage point.

Treasury yields fall when prices rise and vice versa.

Meanwhile, the 30-year bond yield fell by 1.1 basis point to 2.887% while the yield on the two-year Treasury note shaved off 0.8 basis point to 0.701%.

A flurry of new Treasury and corporate-bond offerings is on investors' minds. The spate of issuance comes after $21 billion in three-month Treasurys were sold Monday at a yield of zero, the lowest yield at a three-month auction ever recorded. (http://www.marketwatch.com/story/3-month-treasury-bills-sold-at-record-low-0-yield-2015-10-05)

The Treasury department will sell $24 billion three-year notes on Tuesday, $21 billion in 10-year notes on Wednesday, and $13 billion 30-year bonds on Thursday.

When large volumes of new bonds are sold to the market, prices of existing bonds tend to fall and yields tend to rise.

The impending new bond sales are "the excuse for some of the pressure on 10-year and 30-year [Treasurys]," said David Ader, head of government bond strategy at CRT Capital Group, in a Tuesday note.

Abroad, European government bonds were under selling pressure Tuesday after German manufacturing orders unexpectedly slumped in August (http://www.marketwatch.com/story/german-manufacturing-orders-slump-unexpectedly-2015-10-06).

Investors braced for a speech by European Central Bank President Mario Draghi scheduled for Tuesday evening local time.

"Speculation is rising that the ECB will be forced by lowflation to expand their [quantitative easing] program, and although it's unlikely Draghi will address that prospect directly, any hints in his remarks will have more bearing for the stimulus outlook today than they did several months ago," said Guy LeBas, chief fixed-income strategist at Janney, in a Tuesday note.

The yield on the benchmark 10-year German bond known as the bund, gained 3.1 basis points to 0.598%, after falling Friday to its lowest level since early June.

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(END) Dow Jones Newswires

October 06, 2015 12:13 ET (16:13 GMT)