NEW YORK: US Treasury yields fell on Friday after Federal Reserve Chair Jerome Powell gave no new hints on when the US central bank is likely to begin paring bond purchases, leading investors to assume a taper is unlikely until later in the year.
The US economy keeps making progress toward the Fed's benchmarks for reducing pandemic-era emergency programs, Powell said, but he stopped short of signaling the timing for any policy shift.
Powell made the comments virtually at the Fed's annual Jackson Hole, Wyoming, economic symposium. "The market liked it, and they liked it because its part and parcel of this wait-and-see approach that Powell has adopted," said David Petrosinelli, senior trader at InspereX in New York. "I think basically what he did is effectively push it off to later in the fourth quarter, rather than at the end of the third quarter in September."
Fed Vice Chair Richard Clarida also said on Friday that he continues to believe that the central bank could begin tapering later this year, adding that the Fed had met its "substantial further progress" inflation test and that he expects progress on its employment goal to continue into the fall.
Benchmark 10-year notes fell to 1.310%, down from around 1.341% before Powell's comments were released. The yields briefly reached a two-week high of 1.375% on Thursday.
Five-year note yields, which are more sensitive to intermediate interest rate hikes, outperformed, more than reversing a sell-off on Thursday when hawkish Fed members, including St. Louis Fed President James Bullard, expressed impatience with the ongoing quantitative easing. The five-year yields fell to 0.800%, and are down from a more than seven-week high of 0.864% reached in overnight trading.
Minutes from the Fed's July meeting released last week showed that the bulk of the bank's policy-setting committee expect the Fed will start trimming its bond-buying program later this year. Concerns about the spread of the Delta variant of the coronavirus, however, have raised concerns that the jobs rebound may slow.
"I think the message is clear for Treasuries it's status quo and watch the data," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
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