U.S. Treasury yields climbed on Wednesday as investors digested comments made by Federal Reserve Chairman Jerome Powell and awaited key employment data.
At 5:28 a.m. ET, the yield on the 10-year Treasury was up 1 basis point at 3.987%. The yield on the policy-sensitive 2-year Treasury was up over 3 basis points at 5.047%. Similar levels were last seen in 2007.
Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.
Investors assessed the outlook for central bank monetary policy after Fed Chairman Powell said that interest rate hikes could go higher than expected on the back of strong economic data.
Speaking before the Senate Banking, Housing and Urban Affairs Committee on Tuesday, Powell also indicated that central bank officials would consider speeding up the pace of rate hikes again. Many investors took that as a sign that a 50 basis point rate hike is an option at the Fed’s next meeting.
At the conclusion of its last meeting, the Fed had announced a 25 basis point increase. This marked a slowdown from previous rate decisions, which included four consecutive 75 basis point hikes followed by a 50 basis point increase.
Many investors had been hoping for the Fed to slow the pace of rate hikes or pause them this year as concerns about whether elevated interest rates would cause the U.S. economy to contract spread.
On Wednesday, Powell is expected to make remarks before the House Financial Services Committee. January’s JOLTS job openings figures and ADP’s employment change report for February, which measures jobs created and lost by private businesses, are also due on the same day.
As a tight labor market is often associated with high levels of inflation, investors will be scanning the data for hints about the state of the U.S. economy and the impact of the Fed’s rate hikes.
