Bond yields ease ahead of key Fed comments

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Bond yields eased Friday ahead of key comments from Federal Reserve officials, as traders increasingly price in the prospect that the central bank will continue its rate-hike campaign next month.

What’s happening

  • The yield on the 2-year Treasury

    was 4.23%, down 3.7 basis points. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury

    was 3.63%, down 2.5 basis points.

  • The yield on the 30-year Treasury

    was 3.9%, down 1.1 basis points.

What’s driving markets

On Thursday, the 2-year yield saw its largest yield gain since May 5, as the 10-year yield also rose. That came after a flurry of hawkish Fed speakers, as well as better-than-expected economic data and indications the U.S. debt ceiling will be raised.

Fed Chair Jerome Powell is due to step up to the mic at 11 a.m. Eastern — in a conversation with former Fed Chair Ben Bernanke. New York Fed President John Williams is due to make remarks as well.

Markets are pricing in a 36% chance of a quarter-point hike in June, up from just 16% a week ago, according to the FedWatch tool from the CME.

“We’ll hear from Fed Chair Jerome Powell and he will probably have some interest in keeping a hawkish rhetoric alive, ultimately adding a bit more pressure on bonds and support to the dollar,” said Francesco Pesole, a currency strategist at ING.


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