The 10-year US Treasury bond yields rise on Tuesday, driven by the words of the president of the Federal Reserve, Jerome Powell, before a Senate committee, where he pointed out that progress in moderating inflation would allow interest rates to be cut later this year.
Powell said: “After a lack of progress toward our 2% inflation objective earlier this year, the most recent monthly measurements have shown further modest progress. More positive data would reinforce our confidence that inflation is moving sustainably towards 2%.”
The Futures markets expect 50 basis point interest rate cuts by end-Decemberwith the first expected to occur in September, according to CME’s FedWatch tool.
The data that excites the Fed and the market’s reaction
The strength of the US labor market, as well as continued increases in inflation, are the factors cited by the US central bank as key in influencing the timing and pace of rate cuts.
“With all the communication of the Federal Reserve“We weren’t expecting much from this testimony,” said Lawrence Gillum, chief fixed-income strategist at LPL Financial.
“The movements in the 10-year Treasury yields have really been determined by expectations of the neutral rate and an expectation of a fairly shallow rate cut cycle, so we think we’ll be at these levels for a while.”
The slight rise in returns comes after 10-year bonds fell about 20 basis points last week following a string of weaker-than-expected economic data, including a disappointing reading of ISM nonmanufacturing activity and sharp revisions to the number of nonfarm jobs added over the past two months.
The Trump Factor
At the same time, the growing Market expectations that former President Donald Trump will win the election November’s highs are leading investors to wonder whether there could be another resurgence of inflation, said Charlie Ripley, senior investment strategist at Allianz Investment Management.
“What’s happening on the political front is becoming a bigger factor, but that could change with any news that comes out about (President Joe) Biden and his candidacy for the Democrats,” he said.
He 10-year Treasury bond yield rises 3.9 basis pointsat 4.308%, while the 30-year debt rate rose 3.8 basis points, to 4.496%.
He two-year yield on paper, which usually moves in line with interest rate expectations, gained 1.9 basis points to 4.637%.
A closely watched part of the yield curve, which measures the difference between the returns on two- and 10-year bonds and is considered a bellwether for economic expectations, stood at -33.7 basis points.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
