U.S. Treasury yields came sharply off their highs on Wednesday as market participants said Federal Reserve Chairman Jerome Powell’s prepared remarks for his semiannual testimony to Congress suggested the U.S. central bank would go forward with an interest rate-cut in July.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -0.76% was mostly unchanged at 2.054%, after trading at an intraday high of 2.112%. The 2-year note rate TMUBMUSD02Y, -4.01% slipped 5.1 basis points to 1.854%, while the 30-year bond yield TMUBMUSD30Y, +0.58% was up 1.9 basis points to 2.553%.
What’s driving Treasurys?
Bond yields retreated from their highs after Powell released his prepared remarks ahead of his testimony in Congress at 10 a.m. Eastern time. He underlined the worrisome global economic growth backdrop, setting the stage for lower interest rates when U.S. economic data has yet to point to an imminent recession. Powell also said the Fed would act appropriately to lengthen the U.S. expansion.
European bond-markets sold off after French industrial production surged 2.1% in May, its biggest monthly jump since Nov. 2016. The factory data helped allay concerns that global trade tensions was stalling the eurozone economy’s momentum.
The German 10-year government bond yield TMBMKDE-10Y, +14.56% picked up 4.7 basis points to negative 0.31%, while the French 10-year bond yield TMBMKFR-10Y, +71.13% rose 4.1 basis points to negative 0.02%, Tradeweb data show.
What did market participants’ say?
“Bottom line, Jay Powell fully endorsed the July rate cut and did absolutely nothing to pull the markets back from that expectation. There was little in the statement to imply what this means past the July meeting but we can infer that any further softening in the data past July will likely mean more action from the Fed at subsequent meetings,” wrote Peter Boockvar, chief investment officer at the Bleakley Advisory Group.
Kathy Jones, chief fixed income strategist for Schwab Center for Financial Research, said in a tweet that Powell’s comments were clearly dovish.