U.S Treasury yields were little changed on Wednesday, as investors considered the outlook for the Federal Reserve monetary policy and weighed the state of the economy.
At 5:31 a.m. ET, the yield on the 10-year Treasury was trading at 4.262% after falling by less than 1 basis point. The 2-year Treasury yield was last down by over 1 basis point at 4.953%.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Investors are assessing what could be next in store for interest rates, looking to economic developments for clues about the Federal Reserve’s next moves.
This includes oil prices, which rose sharply on Tuesday after Saudi Arabia extended voluntary cuts to its oil production. Some investors and analysts saw this as a potential signal that inflationary pressures may continue for longer, which could in turn impact the Fed’s next interest rate decisions.
Markets are widely expecting the Fed to keep rates unchanged when it next meets later this month, but the picture is less clear for the remainder of the year.
Speaking to CNBC’S “Squawk Box” on Tuesday, Fed Governor Christopher Waller suggested that recent economic data has been encouraging, and the central bank can therefore “proceed carefully” with policy decisions. The Fed will be paying especially close attention to inflation data, he indicated.
Waller also left the window open for a further interest rate hike.
“I don’t think one more hike would necessarily throw the economy into recession if we did feel that we needed to do one,” he said.
On Wednesday, investors will be looking out for import and export data, as well as figures from the services industry. Several Fed officials are also expected to make further remarks this week, which could provide investors with fresh hints about the monetary policy outlook.
