Treasury yields tick decrease forward of Powell testimony

Bond yields fell on Tuesday forward of Federal Reserve Chairman Jay Powell delivering testimony earlier than Congress.

What’s taking place
  • The yield on the 2-year Treasury
    TMUBMUSD02Y,
    4.871%
    fell by 3.8 foundation factors to 4.863%. Yields transfer in the other way to costs.
  • The yield on the 10-year Treasury
    TMUBMUSD10Y,
    3.941%
    retreated 2.9 foundation factors to three.935%.
  • The yield on the 30-year Treasury
    TMUBMUSD30Y,
    3.872%
    dipped 3.3 foundation factors to three.867%.
What’s driving markets

Government bond yields are nudging decrease as merchants wait to see whether or not Powell provides any contemporary clues concerning the trajectory of financial coverage when he delivers semi-annual testimony in Congress on Tuesday.

The session earlier than the Senate Banking Committee is because of begin at 10 a.m. Eastern. Powell may also communicate earlier than the House on Wednesday.

Two-year U.S. authorities bond yields sit simply shy of their highest ranges in 15 years after the Fed hiked rates of interest by 450 foundation factors within the final 12 months with a purpose to sort out inflation that continues to be greater than thrice the central financial institution’s 2% goal.

Markets are pricing in a 72.3% likelihood that the Fed will elevate rates of interest by one other 25 foundation factors to a spread of 4.75% to five.0% after its assembly on March twenty second, based on the CME FedWatch software.

The central financial institution is predicted to take its Fed funds price goal to five.46% by October 2023, based on 30-day Fed Funds futures.

The mounted revenue market stays cautious. The MOVE index, a gauge of anticipated Treasury worth volatility, is close to its excessive for the yr having jumped about 30% for the reason that begin of February.


Source: Google Finance.

What are analysts saying

“[A]ll eyes will be on whether Powell uses the opportunity to strike a more hawkish tone [during his Congressional testimony], particularly given the strong data and upward inflation revisions since the last FOMC meeting,” mentioned Jim Reid, strategist at Deutsche Bank.

“The question of most interest will be whether he indicates a preference to stick to the 25 basis point pace going forward, or if 50bp moves are still on the table. Futures are currently pricing roughly a 1 in 4 chance of a 50bp move at the next meeting, so confirmation that’s being considered could lead to a sizeable market reaction. Ultimately though, since we’ve still got another jobs report and CPI print before the March decision, there’s still several other factors that’ll influence that decision,” Reid added.

Source web site: www.marketwatch.com

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