U.S. Treasury yields ticked higher on Monday as investors assessed Federal Reserve Chair Jerome Powell’s recent comments and shifted focus to key inflation data due later this week. The cautious tone from Powell, combined with expectations surrounding the Federal Reserve’s next policy move, kept market sentiment mixed.
The benchmark 10-year Treasury yield climbed about 1 basis point to 4.269%, while the 2-year yield added more than 2 basis points to 3.713% as of early Monday morning. Other short-term maturities also saw modest gains, with the 1-year yield rising to 3.921% and the 3-month yield at 4.227%. Yields and prices move in opposite directions, and one basis point equals 0.01%.
Powell, speaking at the Federal Reserve’s annual Jackson Hole meeting on Friday, signaled caution over future interest rate cuts, citing heightened uncertainty in the economic outlook. “While a September rate cut is still not a foregone conclusion, the likelihood of a 25-basis-point reduction increased following Powell’s remarks,” said Ronald Temple, chief market strategist at Lazard.
The Fed Chair highlighted “sweeping changes” in fiscal policies, trade dynamics, and immigration trends as factors complicating the central bank’s decision-making process. These developments, Powell noted, are influencing the balance of risks between the Fed’s dual mandate of maximum employment and stable prices, suggesting a more nuanced approach to rate adjustments.
Investors are now turning their attention to Friday’s release of the July core Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure. Economists expect the core PCE to rise 2.9% year-over-year, slightly higher than June’s 2.8%, according to a Reuters poll. This data will be critical in shaping market expectations ahead of the Fed’s next policy meeting.
Source: cnbc