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Treasury yields were mixed early Tuesday as investors awaited remarks by Federal Reserve Chair Jerome Powell after last week’s U.S. January jobs report saw market participants move interest-rate expectations closer to his forecast.
What’s happening
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.449%
was at 4.429%, down from 4.454% at 3 p.m. Eastern on Monday. Yields and bond prices move opposite each other. -
The 10-year Treasury note yield
TMUBMUSD10Y,
3.656%
was little changed at 3.633% versus 3.632% Monday afternoon. -
The 30-year Treasury bond yield
TMUBMUSD30Y,
3.706%
stood at 3.676%, up from 3.671%.
What’s driving the market
Powell is scheduled to be interviewed by David Rubenstein, the co-chairman of private-equity giant The Carlyle Group, at 12:40 p.m. at the Economic Club of Washington, D.C.
The Fed last Wednesday, as expected, lifted the fed-funds rate by a quarter of a percentage point to 4.5% to 4.75%, but stocks and bonds rallied as Powell played down a recent loosening of financial conditions and acknowledged that a “disinflationary process” had begun.
Stocks slumped Friday after data showed the U.S. economy added a much stronger-than-expected 517,000 jobs in January and the unemployment rate dropped to 3.4%. Fed-funds futures reflected growing trader expectations for the Fed to deliver a 25 basis point rate increase in May after an already expected 25 basis point hike in March, while reducing expectations for cuts by year-end.
Some Fed watchers expect Powell to more forcefully state the case for rates to move higher and remain there when he speaks on Tuesday.
See: Fed’s Powell delivered ‘most counterproductive press conference’ in memory: Larry Lindsey
Minneapolis Fed President Neel Kashkari told CNBC Tuesday that he favored a continued rise in interest rates. Kashkari said he still expects a peak in the fed-funds rate around 5.4%.
“We need to raise rate aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy,” he said.
The Treasury will auction $40 billion of 3-year Treasury notes
TMUBMUSD03Y,
December trade-deficit figures are due at 8:30 a.m.
What analysts say
“At the postmeeting press conference, Mr. Powell indicated a ‘couple’ more rate hikes were probably needed for rates to reach ‘sufficiently restrictive’ levels, but he refrained from firmly pushing back against market expectations for rate cuts later this year,” economists at UniCredit Bank said in a note.
“The question is whether Mr. Powell has changed his view in light of the surprisingly strong payrolls report and the rebound in the ISM services index, which were both released last Friday” after the Fed meeting, they wrote.
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