Bond Report: Treasury yields inch higher after investors sift through Fed speeches

Bond Report: Treasury yields inch higher after investors sift through Fed speeches

U.S. Treasury yields rose slightly Wednesday after bond traders sifted through speeches from senior Federal Reserve officials, looking past the sharp selloff in stocks.


What are Treasurys doing?


The 10-year Treasury note yield TMUBMUSD10Y, 0.675% rose 1.3 basis points to 0.676%, while the 2-year note rate TMUBMUSD02Y, 0.144% was up 0.6 basis point to 0.139%. The 30-year bond yield TMUBMUSD30Y, 1.422% added 1.3 basis points to 1.426%. Bond prices move in the opposite direction of yields.


What’s driving Treasurys?


Senior officials at the U.S. central bank used speeches on Wednesday to call for additional fiscal stimulus, with Fed Chairman Jerome Powell appearing before the House Select Subcommittee on the Coronavirus Crisis.



Chicago Fed President Charles Evans clarified his comments earlier this week when he said the Fed could begin lifting rates before core inflation begins averaging 2%, saying that he felt he had merely repeated the gist of the September policy statement.


Evan’s comments may have helped pulled yield lower from their intraday highs.


The September flash reading of the IHS Markit eurozone composite purchasing managers’ index was at 50.1, barely above the 50 mark that tells if industrial activity is either expanding or shrinking.


The U.S.’s own flash composite PMI reading for September came in at 54.4 from 54.6 in the previous month.


The Treasury Department sold $53 billion of 5-year notes, following the previous day’s successful sale of 2-year notes. Though new debt supply can weigh on the market, the market has been able to absorb the Treasury’s issuance due to the Federal Reserve’s clear commitment to not raising interest rates for the next few years.


What did market participants’ say?


“The Fed is looking for the next fiscal impulse. Monetary policy is done. That’s the big question out there, when are we going to see [fiscal stimulus] go through the system? That’s a big driver of this risk-off narrative as well,” said Robert Daly, director of fixed income for Glenmede Investment Management, in an interview, referring to the recent weakness in risky assets like stocks.