Bond Report: Treasury yields tick up as traders await Fed policy update

This post was originally published on this site

U.S. Treasury yields edged higher on Wednesday as investors awaited the Federal Reserve’s policy update though that could see the U.S. central bank take a downbeat tone on the U.S. economy’s pace of recovery.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.590% rose 1.1 basis points to 0.592%, while the 2-year note rate TMUBMUSD02Y, 0.144% was at 0.143%. The 30-year bond TMUBMUSD30Y, 1.231% gained 1.3 basis points to 1.236%.

What’s driving Treasurys?

The Fed is expected to keep its benchmark interest rate steady on Wednesday near zero, with few changes to policy anticipated, but investors are nonetheless interested in gathering clues on how Fed Chairman Jerome Powell sees the current economic outlook in the face of the coronavirus pandemic.

Analysts argue the Fed is not likely to take drastic actions to provide additional stimulus to the economy, until the central bank concludes its study on monetary policy strategy and its goals.

See: Fed won’t be happy with how the economy is performing, but is not perturbed enough for aggressive action

In U.S. economic data, June trade data and last month’s pending home sales are due in the morning.

What did market participants’ say?

“This is an atypical way of looking at an FOMC meeting, but an important question for Treasuries is whether Chair Powell’s statements spur enough trading volume to change rate momentum. 10-year Treasury trading consistently below 0.60% is supposed to be bullish – and it may prove so. The missing ingredient, however, is scale,” said Jim Vogel, an interest-rate strategist at FHN Financial.

Read: Fed puts $18 trillion U.S. government bond market under lockdown

Add Comment