Bond Report: Treasury yields steady ahead of Powell pandemic testimony

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U.S. Treasury yields were holding ground on Tuesday as fixed-income investors wait for Federal Reserve Chairman Jerome Powell to testify before the House of Representatives on the central bank’s response to the pandemic and the outlook for the economy.

How Treasurys are performing
  • The 10-year Treasury note
    TMUBMUSD10Y,
    1.490%

    was yielding 1.482%, versus 1.481% on Monday at 3 p.m. Eastern Time.

  • The 30-year Treasury bond rate
    TMUBMUSD30Y,
    2.111%

    was at 2.100%, compared with 2.103% a day ago. On Monday the long bond saw its largest yield gain since March 12.

  • The 2-year Treasury note
    TMUBMUSD02Y,
    0.242%

    was at 0.254%, virtually unchanged from its rate on Monday.

Yields move in the opposite direction to prices.

Fixed-income drivers

Yields rose Monday but have been mostly anchored lower since the Fed surprised financial markets last Wednesday with its slightly more hawkish policy update. Will Powell offer more clarity on Tuesday about the rate-setting committee’s inflation stance?

Powell is set to appear before the House Subcommittee on the Coronavirus Crisis to discuss the central bank’s efforts to bolster the economy since the pandemic gripped financial markets and businesses back in March of 2020.

In prepared remarks, Powell said that “the economy has shown sustained improvement.” However, he still sees challenges in the labor market.

See: Fed will support economy ‘for as long as it takes to complete the recovery,’ Powell says

The central bank chief is expected to clarify some of his comments from last Wednesday when the Fed held its key rate at a range between 0% and 0.25% for over year and said it would continue buying $120 billion of Treasury and mortgage bonds, but forecast a rise in interest rates earlier than expected and said it was beginning to discuss tapering asset purchases.

What strategists are saying

“What if most of the recent move in US treasuries is technical and very little to do with the data or the Fed? If true, the danger is that the market and authorities over interpret the macro conclusions and react the wrong way,” wrote Jim Reid, Deutsche Bank strategist in a research note.

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