US Treasury Yields fall after Fed Powell’s comments

U.S. Treasury yields are trading in a volatile manner after the latest comments on employment from Fed Chair Powell.

Fundamental analysis: Bearish momentum for bonds

Earlier this week, the 10-year Treasury yields soared to their highest point since March 2020, while 30-year bond yields climbed more than 2% for the first time since February as investors anticipated the prospects of faster U.S. growth and inflation, as well as the new supply.

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Fed Chair Powell told the Economic Club of New York on Wednesday that the U.S. is still far away from where it needs to be in terms of employment.

However, the yields dropped back the next day, as well as yesterday, as buyers entered the market and the 10-year yields have stayed below the 1.25% level, which is considered as a near-term technical target.

“Everything bearish for bonds is currently playing out and the momentum in and of itself seems to be fading,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

Lyngen also said that the declines might have occurred due to expectations of strong buying at the auctions.

“I think part of what we’re seeing is some dip buying interest, but more importantly concern that the refunding auctions will actually lead to more material dip buying,” he said.

On Tuesday, the U.S. Treasury Department sold $58 billion in three-year notes. The selling price was at a high yield of 0.196%, close to where they have been before the auction.

Investors will continue to monitor the demand for the longer-dated debt sales. Learn more about bonds here.

Technical analysis: Volatile trading

The 10-year Treasury yield is trading over 2% lower on the week after they slumped 3.1% yesterday following Powell’s comments. However, the price action in 10Y yields is still moving higher on a continuous basis. 

Summary

U.S. Treasury yields are trading lower after slipping on Wednesday following the latest comments on employment from Fed Chair Powell.