Treasury yields finished higher on Thursday, a day ahead of Federal Reserve Chairman Jerome Powell’s widely expected Jackson Hole speech.
What happened
- The yield on the 2-year Treasury BX:TMUBMUSD02Y rose 6.6 basis points to 5.016% from 4.950% on Wednesday. Thursday’s level is the third-highest this year, based on 3 p.m. figures from Dow Jones Market Data.
- The yield on the 10-year Treasury BX:TMUBMUSD10Y advanced 3.7 basis points 4.234% from 4.197% Wednesday afternoon.
- The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 1.7 basis points to 4.3% versus 4.283% late Wednesday.
What drove markets
Treasury yields ended higher after data showed U.S. initial jobless benefit claims fell to a three-week low of 230,000 last week, and durable goods orders rose for a third straight month for July after setting aside recent issues at Boeing
. Including transportation, though, orders sank by 5.2% last month.
In an interview with CNBC, Philadelphia Fed President Patrick Harker said he thinks the U.S. central bank has raised interest rates high enough to ultimately bring inflation down, although “we will see.” Meanwhile, his colleague, Boston Fed President Susan Collins, told MarketWatch she is “somewhere in the middle” of the debate on whether the Fed has done enough to combat inflation, and that policy makers have earned the right to take their time in making decisions.
Harker is a voting member of the Federal Open Market Committee this year and Collins is not until 2025.
Traders awaiting Friday’s Jackson Hole speech are focused on whether Powell might address a possible rise in the theoretical neutral rate of interest — a development which would suggest policy makers need to keep hiking borrowing costs.
Read: Why this abstract concept could rattle stocks when Powell speaks at Jackson Hole
Ahead of Powell’s speech, fed funds futures traders priced in an 80.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in November was seen at 39.2%.
Treasury’s auction of 30-year TIPS on Thursday came in “a bit soft,” according to BMO Capital Markets strategist Ben Jeffery.
What analysts are saying
“As always, investors will be parsing comments from Powell and others about the likely road ahead — mainly whether interest rates may remain at relatively high levels for an extended period of time, even if inflation continues to decline from current levels. We expect volatility and position adjustments around events like Jackson Hole, but we broadly view the recent action across equities and fixed income as more of a healthy correction than a new trend,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, N.C., in an online blog.
