logo
Plus   Neg
Share
Email

Treasuries Close Roughly Flat As Traders Shrug Off Powell Comments

Treasuries recovered from an initial move to the downside on Wednesday and spent the remainder of the session showing a lack of direction.

Bond prices bounced back and forth across the unchanged line before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.061 percent.

The choppy trading came even though comments from Federal Reserve Jerome Powell seemed to confirm the central bank is likely to cut interest rates in the near future.

Powell told members of the House Financial Services Committee that crosscurrents, such as trade tensions and concerns about global growth, have continued to weigh on the U.S. economic outlook since the central bank's June meeting.

The Fed chief pointed out that increased uncertainties about the economic outlook and muted inflation pressures led the central bank to pledge after the June meeting to "act as appropriate to sustain the expansion."

Powell noted that many meeting participants saw that the case for a somewhat more accommodative monetary policy had already strengthened.

"Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook," Powell said in his prepared remarks.

Largely mirroring Powell's remarks, the minutes of the central bank's June meeting released later in the afternoon said many participants believe the case for lowering interest rates has strengthened.

The minutes of the latest Fed meeting noted nearly all participants downwardly revised their assessment of the appropriate path for rates due to global developments that led to heightened uncertainties about the economic outlook.

"Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook," the Fed said.

The central bank added, "Several others noted that additional monetary policy accommodation could well be appropriate if incoming information showed further deterioration in the outlook."

Bond traders also shrugged off the results of the Treasury Department's auction of $24 billion worth of ten-year notes, which attracted slightly below average demand.

The ten-year note auction drew a high yield of 2.064 percent and a bid-to-cover ratio of 2.41, while the en previous ten-year note auctions had an average bid-to-cover ratio of 2.45.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

On Thursday, the Treasury is due to announce the results of its auction of $16 billion worth of thirty-year bonds.

Powell's second day of testimony on Capitol Hill may attract some attention on Thursday along with reports on consumer prices and weekly jobless claims.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT