US yields steady ahead of Powell testimony before House panel

NEW YORK: US Treasury yields held steady on Wednesday with the yield curve remaining near its flattest in nearly 11 years in advance of Federal Reserve Chairman Jerome Powell's testimony on the economy before a House of Representatives committee.

Powell's appearance is the second half of his semiannual testimony before Congress. On Tuesday, Powell offered an upbeat assessment on the US economy, which supported traders' view that the US central bank would increase key overnight borrowing costs perhaps two more times in 2018.

Traders and investors anticipate no surprises from Powell when he appears before the House Financial Services Committee at 10 a.m. (1400 GMT).

"He will likely be greeted with tougher questions and a less friendly group than the Senate," said Kevin Giddis, head of fixed income capital markets at Raymond James in Memphis, Tennessee.

Before the Senate Banking Committee on Wednesday, Powell said: "With appropriate monetary policy, the job market will remain strong and inflation will stay near 2 percent over the next several years."

"The Treasury market is trading slightly higher this morning as investors have fully digested the Fed chair's comments and don't seem to have a problem with where the Fed is headed," Giddis said.

The futures market implied traders saw an 89 percent chance the Fed would increase its target range on key interest rates by a quarter point, to between 2.00 percent and 2.25 percent, at its Sept. 25-26 policy meeting, CME Group's FedWatch program showed.

It suggested traders priced in a 58 percent likelihood of another rate hike at the Fed's Dec. 18-19 policy meeting.

Possibility of further rate increases pinned the two-year yield near its highest since August 2008. It was last 2.611 percent, down 0.4 basis point from late on Tuesday.

The spread between two-year and 10-year Treasury yields was 24.70 basis points after touching 23.40 basis points earlier Wednesday, which was its tightest since July 2007.

The yield on the 10-year Treasury was unchanged on the day at 2.862 percent.

Treasury yields hit session lows earlier, following a government report that domestic housing starts fell to a nine-month low in June on rising costs and land shortage.