Treasury yields steady as market prepares for Powell testimony

By Jamie Chisholm

Bond yields were tightly rangebound early Tuesday as traders awaited comments from Federal Reserve Chair Jerome Powell.

What's happening

The yield on the 2-year Treasury BX:TMUBMUSD02Y fell less than 1 basis point to 4.639%. Yields move in the opposite direction to prices.The yield on the 10-year Treasury BX:TMUBMUSD10Y rose less than 1 basis point to 4.291%.The yield on the 30-year Treasury BX:TMUBMUSD30Y added less than 1 basis point to 4.472%.

What's driving markets

Treasury yields were little changed as investors eyed a fresh update on Federal Reserve thinking.

Powell is due to begin his testimony before the Senate at 10 a.m. Eastern, and then he will be quizzed by the House on Wednesday.

The Fed has already released the semi-annual report on which Powell's comments are based, but has not released Powell's introductory comments.

"The first day of the testimony is always the most important day as we will get to catch the overall tone and the key messages," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Some expect Powell to sound cautious regarding the progress on inflation and tell the U.S. politicians to be patient until the Fed gathers enough evidence that inflation is on a solid path toward their 2% target. But there is a chance that he sounds slightly more optimistic and willing to cut interest rates sooner rather than later, pointing at the slowing economic growth and loosening jobs market - which will eventually help cooling inflation," Ozkardeskaya added.

Powell's comments come ahead of Thursday's release of the consumer price index for June, which economists think will show the headline annual rate easing to 3.1% from 3.4% in May.

Currently, markets are pricing in a 95.3% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on July 31st, according to the CME FedWatch tool.

The chances of at least a 25 basis point rate cut by the subsequent meeting in September is priced at 77.1%, up from 50.5% a month ago.

The Treasury will release results of a $58 billion auction of 3-year notes at 1 p.m.

-Jamie Chisholm

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07-09-24 0419ET

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