Bond prices edge higher after Yellen testimony, weak US data

NEW YORK: US Treasuries prices edged higher on Tuesday, erasing early losses after testimony from Federal Reserve Chair Janet Yellen kept the door open for a later than mid-year interest rate hike and U.S. economic data was weaker than expected.

Benchmark 10-year Treasury yields and 30-year yields hit one-week lows after Yellen told a congressional committee that the Fed is preparing to consider interest rate hikes "on a meeting by meeting basis," marking a subtle change of emphasis in how the Fed has been speaking about its plans for the first rate increase since 2006.

In prepared remarks to the Senate Banking Committee released at 10 a.m. ET (1500 GMT), Yellen described how the Fed's rate-setting policy committee will likely proceed in coming months in an effort to increase the Fed's flexibility and mute potential market reaction as the central bank approaches its "liftoff" date.

Analysts said the testimony gave the Fed more flexibility to hike rates later than June of this year.

"They're trying to give themselves more flexibility without locking themselves into a commitment one way or the other, which in general can be perceived as being dovish," said Jonathan Rick, interest rate derivatives strategist at Credit Agricole in New York.

Three-year note yields hit 0.9866 percent, their lowest in over two weeks.

Data showing U.S. consumer confidence pulled back from a multi-year high and fell more than expected in February also helped Treasuries prices notch slight gains. The Conference Board meanwhile said its index of consumer attitudes fell to 96.4, below economist expectations for a reading of 99.6, according to a Reuters poll.

Treasuries prices had earlier seen some selling pressure on uncertainty over Yellen's testimony and reduced appetite for safe-haven debt after euro zone partners approved Greece's reform plan.

"The consumer confidence was significantly weaker than expected, although it wasn't enough to change one's opinion on the economy," said Lou Brien, market strategist at DRW Trading in Chicago.

Markets also awaited the Treasury's auction of $26 billion in two-year notes at 1:00 p.m. (1800 GMT).

U.S. 30-year bonds and 10-year notes last held near one-week lows. Long-dated bonds were up 4/32 in price to yield 2.64 percent, from a yield of 2.65 percent late on Monday. Benchmark 10-year notes were last up 4/32 to yield 2.04 percent, from 2.06 percent late Monday.