The yield on the 2-year Treasury headed for its highest closing level since 2006 on Friday, after Federal Reserve Chair Jerome Powell delivered what some analysts interpreted as hawkish comments about the policy outlook.
What’s happening
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
touched 5.1%, up 8.4 basis points from 5.016% on Thursday. It’s on its way to the highest closing level since July 25, 2006, when it ended the New York session at 5.114%. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 4.274%, up 4 basis points from 4.234% Thursday afternoon. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was 4.327%, up 2.7 basis points from 4.3% late Thursday.
What’s driving markets
In a widely anticipated speech at Jackson Hole, Wyo., Powell said that inflation remains too high and policy makers are prepared to raise interest rates further if appropriate. Policy makers will also proceed carefully as they assess the incoming data, and “restrictive policy will likely play an increasing role” in getting inflation back down to the Fed’s 2% target, he said.
See: Fed’s Powell unsure of the need to raise interest rates further
The Fed chairman said that policy makers can’t identify the precise level of the neutral level, or theoretical level at which real short-term interest rates that neither stimulates nor restricts the economy — adding to the uncertainties the central bank is grappling with. “Doing too little” may allow inflation to become entrenched and “doing too much” can do unnecessary damage to the economy, Powell said.
In Friday’s data releases, the final reading of the U.S. consumer sentiment index slipped to 69.5 in August versus a preliminary reading of 71.2.
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