Treasury Yields Dip as Trump Targets Fed Chair Powell Amid Economic and Geopolitical Uncertainty
U.S. Treasury yields dropped on Thursday amid rising political tension surrounding Federal Reserve Chairman Jerome Powell. The declines came after reports that President Donald Trump is considering replacing Powell as early as September or October. This renewed uncertainty among investors, causing the 10-year Treasury yield to fall by 2 basis points to 4.27%, while the 2-year dropped to 3.756%. The 30-year yield also declined slightly to 4.827%.
The market reaction follows Powell’s testimony before the Senate Banking Committee, where he reaffirmed the Federal Reserve’s commitment to curbing inflation. He highlighted the ongoing ambiguity around the economic effects of Trump’s tariffs. Despite maintaining a steady rate policy, Powell’s stance has received backlash from Trump, who openly criticized him at a NATO press conference and hinted at potential successors.
President Trump expressed strong dissatisfaction with Powell’s performance, stating, “He goes out pretty soon, fortunately, because I think he’s terrible.” He added that he is narrowing down possible replacements. This direct challenge to the Fed’s independence has spurred concerns about the future direction of U.S. monetary policy, contributing to volatility in bond markets.
Investors are now closely watching for key economic indicators, particularly May’s personal consumption expenditures (PCE) index, which is expected on Friday. Powell noted earlier this week that the core PCE—excluding food and energy—is forecast to rise to 2.6%, up from 2.5% in April, suggesting persistent inflationary pressure.
Additional factors weighing on market sentiment include the latest jobless claims data expected Thursday and geopolitical developments. Investors are cautiously observing the fragile ceasefire between Israel and Iran, recently brokered by Trump. Though there were initial violations, the truce is reportedly holding, adding another layer of complexity to the global economic outlook.
Source: Cnbc