MW: Treasury yields set to rise for 3rd session in a row ahead of Yellen
Treasury yields rose on Monday and were on track for a third straight day of gains as investors awaited Federal Reserve Chairwoman Janet Yellen’s testimony before Congress on Tuesday.
The yield on the 10-year Treasury note TMUBMUSD10Y, +1.26% rose 3.2 basis points to 2.440%, while the yield on the two-year note TMUBMUSD02Y, +1.02% rose two basis points to 1.214%. The 30-year bond TMUBMUSD30Y, +0.90% rose 2.7 basis points to 3.034%.
Yellen is expected to give her semiannual testimony about monetary policy and the Fed’s view on the U.S. economy to the Senate Banking Committee Feb. 14. Then, she’s expected to deliver testimony to the House Financial Services Committee the following day.
When the U.S. central bank delivered its latest policy statement on Feb. 1, the central bank sounded noncommittal about the possibility of a March hike, sparking a sudden drop in Treasury yields. But comments from Fed officials since then suggest that three interest-rate hikes in 2017 remain a possibility.
On Saturday, Fed Vice Chairman Stanley Fischer emphasized that the details of President Donald Trump’s fiscal policy plans remain uncertainty.
Peter Boockvar, chief market analyst at The Lindsey Group, said in a research note that if Fischer’s comments are any indication, the word “uncertainty” will appear in Yellen’s remarks on Tuesday. Though, with that said, Boockvar still expects her to leave open the possibility of a March hike.
“There seems to be concern that Yellen could talk up the chances of a rate hike in March,” said Guy LeBas, chief fixed-income strategist at Janney.
Yellen is expected to highlight how employment growth and inflation are nearing the Fed’s targets, while also underscoring the need to maintain flexibility and react to, but not predict, President Trump’s fiscal policy initiatives, LeBas said.
Treasury yields rose sharply following President Trump’s unexpected electoral victory as investors bet that his policy proposals would bolster growth and inflation, should they be enacted. Since the beginning of the year, yields have more or less moved sideways as investors waited for more details about Trump’s plans, and for more clues about the path of monetary policy.
