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Treasuries Extend Yesterday's Sell-Off In Reaction To Powell Comments


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Following the substantial decrease seen in the previous session, treasuries saw further downside during trading on Tuesday.

Bond prices came under pressure early in the day and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.8 basis points to 2.373 percent.

The ten-year yield added to the 16.7 basis point spike seen on Monday, once again ending the session at its highest closing level since May 2019.

The extended decline by treasuries came as traders continued to react to comments from Federal Reserve Chair Jerome Powell, who suggested the central bank might raise interest rates more aggressively if inflation remains too high.

“We will take the necessary steps to ensure a return to price stability,” Powell said in remarks to the National Association for Business Economics on Monday. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

He added, “And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

The comments from Powell came after the Fed raised interest rates by 25 basis points last week and signaled more rate hikes are likely in the coming months.

On the heels of Powell’s remarks, CME Group’s FedWatch Tool is currently indicating a 38.4 percent chance the Fed will raise rates by 25 basis points in May and a 61.6 percent chance of a 50 basis point rate hike.

Following a couple quiet days of the U.S. economic front, trading on Wednesday may be impacted by reaction to a report on new home sales.

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