This post was originally published on this site
Treasury yields edged lower Wednesday, pulling back slightly from levels last seen in 2019, as investors assessed the Federal Reserve’s policy path and monitored developments in the Russia-Ukraine war.
What’s driving yields?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.382%
was at 2.364%, down from 2.375% at 3 p.m. Eastern on Tuesday -
The 2-year Treasury yield
TMUBMUSD02Y,
2.133%
was at 2.134%, down from 2.152% Tuesday afternoon. -
The 30-year Treasury bond yield
TMUBMUSD30Y,
2.614%
was at 2.592%, unchanged from its level late Tuesday. - Based on 3 p.m. levels, the 10- and 2-year notes on Tuesday were at their highest since May 2019, while the 30-year was at its highest since July 26, 2019.
What’s driving the market?
Treasurys have sold off sharply in March, driving yields up. Federal Reserve Chairman Jerome Powell earlier this week said policy makers were prepared to raise benchmark interestrates by more than 25 basis points, or a quarter of a percentage point, in future meetings if needed to rein in inflation. The move came after the Fed last week delivered a quarter-point rise and signaled expectations for a total of 10 to 11 quarter-point moves by the end of 2023.
The Treasury yield curve, a line measuring yields across all maturities, has flattened significantly in March, with investors looking for the 2-year yield to move above the 10-year yield — a phenomenon that has preceded most past recessions.
Read: The yield curve is speeding toward inversion — here’s what investors need to know
Investors will hear from Powell again Wednesday morning when he participates in a panel discussion on challenges faced by central bankers in a digital world. San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester were also scheduled to speak Wednesday.
Daly on Tuesday said the Fed needs to steadily raise interest rates up to a neutral level and look at tightening monetary policy more to restrict economic growth so that inflation comes back down. Mester on Tuesday said she found it appealing to “front-load some of the needed increases earlier rather than later in the process because it puts policy in a better position to adjust if the economy evolves differently than expected.”
Russian forces continued to escalate attacks on civilian areas of Ukraine cities. President Joe Biden is scheduled to meet with allies in Brussels on Thursday as they announce new measures aimed at punishing Moscow for its invasion of Ukraine.
Data on U.S. February new home sales is due at 10 a.m.
What are analysts saying?
“A strong economy and unacceptably high inflation are building a consensus to front-load tightening and bring the policy rate to/above the neutral level,” wrote analysts at KBC Bank in Brussels.
