(Bloomberg) – U.S. Treasuries rose Wednesday after Federal Reserve Chairman Jerome Powell expressed confidence in curbing inflation but said the central bank was unlikely to start cutting interest rates in March. was reduced.
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Powell’s comments followed statements from the Fed indicating there is no need to rush into easing policy. As expected, key interest rates were left unchanged, but policymakers signaled they would take a cautious approach before changing course.
The message from the Fed comes after yields fell earlier in the day after data showing a cooling labor market was released and a surprise quarterly loss at the Bank of New York reignited concerns about the financial health of regional financial institutions. This gradually had an impact on the rising market price.
But U.S. Treasury yields fell again on the day as traders continued to bet on a series of deep interest rate cuts this year on Powell’s confident tone about the central bank’s progress in pulling inflation back toward its target. did.
Two-year Treasury yields fell 6 basis points to 4.27% after Powell’s news conference, after falling as much as 15 basis points earlier in the day. The yield on the 10-year Treasury note fell 5 basis points to 3.99%.
“Markets are obsessed with anything that looks dovish, and so far the message is not if a rate cut will happen, but when. It’s about.”
Expectations for a rate cut increased after job creation and labor costs data released early Wednesday. At the same time, investors sought refuge after New York Community Bancorp announced a surprise quarterly loss, sparking concerns about the U.S. banking system that heightened last year after the failure of Silicon Valley Bank, and its stock price plummeted. Ta.
Yields fell sharply in several euro zone markets as France’s slower-than-expected inflation supported prospects for a rate cut from the European Central Bank, while Treasury gains supported government bonds globally did.
Ahead of this, bond prices were buoyed by the January ADP jobs report and fourth-quarter employment cost data (both of which grew weaker than expected), as well as the Treasury’s announcement of support for bid sizes for the February-April period. I was receiving it. The Treasury Department said this rate hike is likely to be the last for at least the next few quarters.
Philip Newhart, director of market and economic research at First Citizens Bank Wealth, said: “Chairman Powell’s press conference made it clear that the FOMC’s base case is not to lower the overnight rate at its March meeting.” “However, the Fed will continue to rely on data.” “We think the Fed may start lowering the federal funds rate around the middle of this year, but only three or four cuts in 2024.”
–With assistance from Edward Bolingbroke, Alexandra Harris and Liz Capo McCormick.
(Will be updated throughout.)
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