Treasury yields rose Thursday, a day after Federal Reserve Chair Jerome Powell said policymakers would take a meeting-by-meeting approach to interest-rate moves while signaling more tightening is on the way.
Investors were also awaiting the release of data on second-quarter gross domestic product.
What yields are doing
- The yield on the 2-year Treasury note
was at 2.976%, up from 2.968% at 3 p.m. Eastern on Wednesday. Yields and debt prices move opposite each other.
- The 10-year Treasury note yield
was 2.783%, up from 2.731% Wednesday afternoon.
- The yield on the 30-year Treasury bond
jumped to 3.078% Thursday, up from 3% late Wednesday.
What’s driving the market
Investors were awaiting a first estimate of second-quarter gross domestic product at 8:30 a.m. Economists surveyed by The Wall Street Journal produced a consensus forecast for a 0.3% annualized rise, with some looking for the measure to show a second consecutive contraction.
Treasury yields fell Wednesday after the Fed delivered a widely expected 75 basis point increase in the fed-funds rate and signaled more hikes were on the way. Fed Chair Jerome Powell warned that the economy would need to see a period of below-trend growth to rein in red-hot inflation and warned that the path to so-called soft landing for the economy continued to narrow.
Powell also said another 75 basis point rise at the Fed’s next policy meeting in September was a possibility but that the central bank would take a meeting-by-meeting approach to future moves, effectively signaling the end of a practice known as forward guidance.
Fed-funds futures show traders have priced in a 70% probability of a 50 basis point hike in September and a 30% chance of a 75 basis point move, according to the CME FedWatch tool, scaling back expectations for the larger increase.
Investors will also get a look at weekly jobless claims data at 8:30 a.m.
What analysts say
“Recession prognostication will receive the added benefit of this morning’s GDP figures as U.S. rates continue to trade the implications from Powell’s shift in favor of a meeting-by-meeting approach to monetary policy,” wrote Ian Lyngen and Ben Jeffery, rates strategists at BMO Capital Markets, in a note.
“The front-end and belly’s outperformance overnight points to a market that is interpreting this nuance as a less aggressive tightening cadence. We’ll offer the observation that while there is the potential for a downshift in the size of rate hikes at the September FOMC and beyond, such a change will need to be predicated on progress in containing inflation, and the information revealed within the July and August CPI prints,” they wrote.