TREASURIES-Yields drop after Fed's Powell says economy still needs support

Reuters2021-02-24

(Updates throughout, adds Powell comments, analyst reaction)

By Ross Kerber

Feb 23 (Reuters) - Longer-term U.S. Treasury yields fell on Tuesday after Federal Reserve Chairman Jerome Powell said the economy still needed central bank support.

The benchmark 10-year yield was down a basis point at 1.3585% in early afternoon trading. It touched a high of 1.389% early Tuesday before Powell testified at a U.S. Senate Banking Committee hearing in Washington.

Powell said interest rates would remain low and the Fed's bond purchases would continue "at least at the current pace until we make substantial further progress towards our goals ... which we have not really been making."

Analysts said the market's move showed that Powell's remarks reinforced status quo expectations, that the Fed remains dovish despite some inflation concerns.

"His basic stance was the same and it provided some reassurance to the bond market," said Julia Coronado, president of analysis firm Macropolicy Perspectives. "In Powell's even-keeled way he said, 'Our job is far from over. We're going to be here buying Treasuries for some time.'"

Expectations of a consumer price uptick have significantly boosted yields on longer-term U.S. debt since the summer. Shortly before Powell's testimony, the 30-year bond yield hit 2.34%, the highest since early January 2020.

It was still up 2.2 basis points at 2.2017% early Tuesday afternoon, reflecting investors' longer-term inflation expectations.

The Nasdaq composite index fell more than 2% as investors sold off mega-cap growth stocks on valuation concerns.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes , seen as an indicator of economic expectations, was at 124 basis points, about a basis point below Monday's close.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1149%.

February 23 Tuesday 12:45PM New York / 1745 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 0.0325 0.033 0.000

Six-month bills 0.05 0.0507 0.003

Two-year note 100-5/256 0.1149 0.000

Three-year note 99-184/256 0.2199 -0.005

Five-year note 99-2/256 0.5793 -0.018

Seven-year note 98-112/256 0.9837 -0.011

10-year note 97-212/256 1.3585 -0.010

20-year bond 97-120/256 2.0298 0.011

30-year bond 92-220/256 2.2017 0.022

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 9.25 0.25

spread

U.S. 3-year dollar swap 10.75 0.00

spread

U.S. 5-year dollar swap 13.25 0.25

spread

U.S. 10-year dollar swap 8.00 -0.25

spread

U.S. 30-year dollar swap -24.50 -1.00

spread

(Reporting by Ross Kerber in Boston; Editing by Mark Heinrich and Richard Chang)

((ross.kerber@thomsonreuters.com; (617) 856 4341; Reuters Messaging: Ross.Kerber.Reuters.com@Reuters.net))

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

Leave a comment
1