Published: March 6, 2024, 4:23am ET
Bond yields inched higher early Wednesday morning as traders awaited Congressional testimony from Federal Reserve Chairman Jay Powell.
what’s happening
what drives the market
The focus for the bond market will be on Federal Reserve Chairman Jerome Powell’s Congressional testimony starting at 10 a.m. ET on Wednesday and repeating at 9:40 a.m. Thursday.
trader…
Bond yields inched higher early Wednesday morning as traders awaited Congressional testimony from Federal Reserve Chairman Jay Powell.
what’s happening
- The yield on the two-year government bond BX:TMUBMUSD02Y rose less than 1 basis point to 4.568%. Yields move in the opposite direction to prices.
- The yield on the 10-year US Treasury note BX:TMUBMUSD10Y rose 1.2 basis points to 4.167%.
- The yield on the 30-year US Treasury bond BX:TMUBMUSD30Y increased by 1.7 basis points to 4.312%.
what drives the market
The focus for the bond market will be on Federal Reserve Chairman Jerome Powell’s Congressional testimony starting at 10 a.m. ET on Wednesday and repeating at 9:40 a.m. Thursday.
Traders will be watching to see whether Powell reinforces recent statements from Fed officials that they intend to wait to see if inflation pressures continue to subside before starting to cut rates.
Other Fed speakers on Wednesday include San Francisco Fed President Mary Daley, who will speak at noon, Minneapolis Fed President Neel Kashkari, who will provide comments at 4:15 p.m., and a Fed summary of economic anecdotes. Beige Book is scheduled to be announced at 2 p.m.
Wednesday also marks the start of three days of labor data that should influence the Fed’s thinking. The ADP report on private sector employment for February will be released at 8:15 a.m., followed by the January jobs survey at 10 a.m.
The weekly new jobless claims numbers will then be released on Thursday, and the numbers will conclude on Friday with the release of nonfarm payrolls for February.
Ahead of that, the market has priced in a 97% chance that the Fed will keep interest rates unchanged between 5.25% and 5.50% after its next meeting on March 20, according to the CME FedWatch tool.
The probability of a rate cut of at least 25 basis points by the next meeting in May is 21.6%, down from 66.6% just a month ago, and the probability of a similar policy in June is 70.6%. It is 5%.
According to federal funds futures on the 30th, the central bank is expected to lower the target federal funds rate to around 4.55% by December 2024.
Meanwhile, in Europe, the UK 10-year government bond yield BX:TMBMKGB-10Y rose 4.1 basis points to 4.147% ahead of the government’s budget proposal that includes tax cuts for workers.
What are the analysts saying?
“While financial conditions have continued to ease since the last Fed meeting in January, near-term inflation expectations in the market have also increased. That’s not all that surprising,” said Jim Reid, a strategist at Deutsche Bank.
“But even so, the market expectation of three to four rate cuts in 2024 still exists around the Fed dot plot in December, which showed three rate cuts, and Chairman Powell is still reinforcing that message. It will be interesting to see if it validates. It will be a few more weeks before we have a new dotplot,” Reid added.
