The sale of US government bonds gained steam on Thursday, after Federal Reserve Chairman Jerome Powell said the central bank’s current political position was adequate, disappointing some investors who hoped it could be a major concern about the recent rise in Treasury yields.
The yield on the 10-year treasury bill, which rises as bond prices fall, was set at 1.547%, according to Tradeweb, up from 1.479% before the start of Mr Powell’s interview at The Wall Street Journal Jobs Summit and 1.469% Wednesday.
Mr Powell said the recent increase in Treasury yields had drawn his attention and suggested that the Fed could step in if overall financial conditions tightened much further. But he also stopped pointing out that the Fed is close to buying more long-term treasuries each month in an effort to contain yields because some investors thought it was possible.
“The market has clearly prepared for more guidance than the Fed is preparing now,” said Jim Vogel, an interest rate strategist at FHN Financial.
Prior to Thursday, Treasury yields had seen one of their largest increases in recent years, with a 10-year yield rising from about 0.9% at the beginning of the year.
Investors and Fed officials alike say that rising yields generally reflect a thriving outlook, thanks to the distribution of coronavirus vaccines and large amounts of government incentives.
Higher yields could also attract the economy by increasing borrowing costs for individuals and businesses, leading some to believe that the Fed could try to stop them from growing further.
Stock prices also fell following Mr Powell’s remarks, reflecting concerns about the bond market.
Without intervention, many analysts believe that yields could continue to rise this year, the 10-year yield is approaching 1.75% or even 2%, as investors avoid the possibility of the Fed starting to raise short-term interest rates. in the next few years.
However, some believe yields are already higher than they should be, arguing that long-term forces will contain inflation and make it difficult to raise Fed rates.
Write to Sam Goldfarb at [email protected] and Sebastian Pellejero at [email protected]
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