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Yields for U.S. government debt were little-changed on Friday, ahead of Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole symposium of central bankers that is being held online this year again due to the pandemic.
What yields are doing
-
The 10-year Treasury note
TMUBMUSD10Y,
1.348%
yields 1.342%, virtually unchanged from Thursday’s rate at 3 p.m. Eastern Time. -
The 30-year Treasury bond rate
TMUBMUSD30Y,
1.939%
was at 1.938%, compared with 1.940% a day ago. -
The 2-year Treasury note
TMUBMUSD10Y,
1.348%
was yielding 0.246%, versus 0.237% on Thursday. - For the week, the 10-year Treasury has risen by 8.3 basis points, the 30-year bond yield has climbed 6.5 basis points, and the 2-year Treasury note rate was up 2.2 basis points, based on rates at 3 p.m. last Friday.
What’s driving the market?
Powell’s remarks on Friday at the virtual Jackson Hole event hosted by the Kansas City Federal Reserve Bank start at 10 a.m. ET and will be streamed online, with investors looking for clues on the impact of the spread of coronavirus delta variant on the timing and scope of a rollback of the central bank’s monthly purchases of $120 billion in Treasurys and mortgage-backed securities.
Market participants widely doubt that Powell will announce the official start of so-called tapering of the Fed bond purchases but may investors will be attuned to wording that implies that it could get off the ground before year-end.
Minutes of the Fed’s July 27-28 meeting showed that most of the 19 top Fed officials said that they thought it would be appropriate to start reducing monthly asset purchases this year.
On Thursday, three non-voting members of the Fed reiterated that they would like to see tapering soon.
Kansas City Fed President Esther George said she backed tapering the central bank’s asset purchases “sooner rather than later,” while St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan reiterated calls to begin tapering asset purchases in the near term in interviews.
The Jackson Hole event, which normally is a gathering of monetary policy makers near the Grant Teton mountain range in Jackson Hole, Wyo., has become a place where significant policy shifts are relayed to the public, with last year’s focus on the Fed’s strategy move to allow its annual inflation target of 2% to overshoot as it combats any weakness in the labor market.
U.S. government bond yields have been steadily drifting higher in recent weeks, with the 10-year at around its highest since Aug. 12, but remaining at historically low levels, while facing the prospect of the eventual end of an accommodative stance by the Fed.
Some speculate that Powell may deliver a speech that gives the Fed a bit more time to wade through additional data, including a report on the jobs market for September. The Fed next meets Sept. 21-22.
A number of Fed speakers will be talking before and after Powell. That includes Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Cleveland’s Fed President Loretta Mester and Bullard.
What analysts are saying
“We now expect a formal announcement of tapering to come in November, with tapering to start in December (slightly earlier than we previously anticipated),” wrote analysts at UniCredit in a Friday note.
“Mr. Powell is unlikely to provide any details on either the composition or pace of tapering as that is for the FOMC to decide and the July FOMC minutes show that no decision has yet been taken,” UniCredit wrote.
