Stock Market

Treasury yields rise after Fed decision as investors await GDP reading – News Opener

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
    TMUBMUSD02Y,
    2.838%

    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
    TMUBMUSD10Y,
    2.666%

    was 2.783%, up from 2.731% Wednesday afternoon.

  • The yield on the 30-year Treasury bond
    TMUBMUSD30Y,
    3.013%

    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.

Read: Was Fed’s Powell dovish or not? 4 key takeaways from today’s press conference

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.

 Source link

Back to top button
SoundCloud To Mp3