Treasuries Fluctuate After Yellen Signals Fed to Be Flexible, Treasuries rose after Federal Reserve Chair Janet Yellen signaled that a change in the central bank’s guidance on interest rates won’t lock it into a timetable for raising borrowing costs.
U.S. government debt swung between gains and losses as Yellen repeated in testimony before Congress that the Fed’s pledge to be “patient” on beginning to tighten means an increase is unlikely for “at least the next couple” of meetings. She said the labor market wasn’t fully healed and that she saw no evidence that inflation was rising toward the central bank’s 2 percent goal.
Yellen signaled “they need to see continued strength in the data and reasonable confidence that they will be able to move back to their 2 percent objective over the medium term,” said Eric Green, head of U.S. rates and economic research at TD Securities USA LLC. “That is being looked at by the bond market that that may put a September hike out of the question.”
The benchmark 10-year yield fell two basis points to 2.04 percent at 11:41 a.m. New York time, according to Bloomberg Bond Trader data. The yield jockeyed between 2.10 percent and 2.04 percent.
“It is important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings,” Yellen said. “We are reasonably confident that inflation will move back to our 2 percent inflation target over time.”
The Fed’s preferred gauge of inflation, the personal consumption expenditures index, has stayed below 2 percent since April 2012, and it rose just 0.7 percent in the year through December.
Yellen is testifying in the Senate and will address the House of Representatives Wednesday.
“Yellen’s focus on inflation and her reiteration of ‘patient’,” is lending support to lower yields, Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia, wrote in an e-mail response to questions.
Minutes of the Fed’s Jan. 27-28 meeting published last week signaled policy makers were willing to keep rates low for longer, given risks to the economy ranging from a stronger dollar to wages and housing. The discussion took place before January’s employment data was published.
Prior to Tuesday’s testimony, traders saw a 51 percent chance the Fed will raise the benchmark rate from between zero to 0.25 percent by its September meeting, according to Fed funds futures data compiled by Bloomberg. That’s up from 44 percent a month ago.
The Treasury Department will auction $26 billion of two-year notes in the first of four sales of coupon-bearing debt this week.
“There was a lot of clearing out of positions yesterday getting ready for Yellen,” said David Keeble, head of fixed-income strategy at Credit Agricole SA in New York. “Nobody wants big positions right now, and we have an auction as well today. So things are pinned down.”
U.S. government debt swung between gains and losses as Yellen repeated in testimony before Congress that the Fed’s pledge to be “patient” on beginning to tighten means an increase is unlikely for “at least the next couple” of meetings. She said the labor market wasn’t fully healed and that she saw no evidence that inflation was rising toward the central bank’s 2 percent goal.
Yellen signaled “they need to see continued strength in the data and reasonable confidence that they will be able to move back to their 2 percent objective over the medium term,” said Eric Green, head of U.S. rates and economic research at TD Securities USA LLC. “That is being looked at by the bond market that that may put a September hike out of the question.”
The benchmark 10-year yield fell two basis points to 2.04 percent at 11:41 a.m. New York time, according to Bloomberg Bond Trader data. The yield jockeyed between 2.10 percent and 2.04 percent.
“It is important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings,” Yellen said. “We are reasonably confident that inflation will move back to our 2 percent inflation target over time.”
The Fed’s preferred gauge of inflation, the personal consumption expenditures index, has stayed below 2 percent since April 2012, and it rose just 0.7 percent in the year through December.
Yellen is testifying in the Senate and will address the House of Representatives Wednesday.
“Yellen’s focus on inflation and her reiteration of ‘patient’,” is lending support to lower yields, Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia, wrote in an e-mail response to questions.
Minutes of the Fed’s Jan. 27-28 meeting published last week signaled policy makers were willing to keep rates low for longer, given risks to the economy ranging from a stronger dollar to wages and housing. The discussion took place before January’s employment data was published.
Prior to Tuesday’s testimony, traders saw a 51 percent chance the Fed will raise the benchmark rate from between zero to 0.25 percent by its September meeting, according to Fed funds futures data compiled by Bloomberg. That’s up from 44 percent a month ago.
The Treasury Department will auction $26 billion of two-year notes in the first of four sales of coupon-bearing debt this week.
“There was a lot of clearing out of positions yesterday getting ready for Yellen,” said David Keeble, head of fixed-income strategy at Credit Agricole SA in New York. “Nobody wants big positions right now, and we have an auction as well today. So things are pinned down.”
