U.S. bond yields were little changed and holding at their lowest in a week as traders eyed a speech by Federal Reserve Chair Jerome Powell on Friday.
What’s happening
-
The yield on the 2-year Treasury
BX:TMUBMUSD02Y
rose 2.6 basis points to 4.976%. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was barely changed at 1.8 4.198%. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was little moved at 4.273%.
What’s driving markets
Benchmark Treasury yields are holding their lowest levels in a week after surveys from the U.S. and Europe, released Wednesday, pointed to sharper than expected slowdown in economic activity across developed nations.
The 10-year Treasury yield which hit 4.36% on Monday, a near 16-year peak, was trading down at 4.198% early Thursday, as traders also awaited a speech due Friday from Powell.
Ahead of Powell’s comment, markets are pricing in an 87% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on September 20, according to the CME FedWatch tool.
The chances of a 25 basis point interest rate hike to a range of 5.50 to 5.75% at the subsequent meeting in November is priced at 40%.
The central bank is not expected to take its Fed funds rate target back down to around 5% until June 2024, according to 30-day Fed Funds futures.
U.S. economic updates set for release on Thursday include the weekly initial jobless benefit claims and durable goods orders for July, both due at 8:30 a.m. Eastern.
The Treasury will auction $8 billion of 30-year TIPS paper on Thursday.
What are analysts saying
Patrick Munnelly, analyst at TickMill Group, addressed the looming speeches at Jackson Hole.
“The pivotal central bank speeches, notably from Fed Chair Powell and ECB President Lagarde, are scheduled for Friday. The central theme for this year’s symposium revolves around ‘Structural shifts in the global economy.’ This thematic focus could provide valuable insights into various factors reshaping the world economy, including shifts in global trade dynamics and elevated levels of debt, ” wrote Munnelly in a note published Thursday.
“One significant consideration is the possibility that these structural changes could lead to interest rates stabilizing at levels higher than those observed before the onset of the pandemic. This could have significant implications for monetary policy and global financial markets. As such, the speeches during the symposium are anticipated to shed light on the central banks’ perspectives regarding these matters and how they might guide their respective policies to navigate these shifts effectively,” Munnelly concluded.
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