10-year U.S. Treasury yield surges above 1.50% as Powell says he’s monitoring bond market

U.S. Treasury yields finished sharply higher on Thursday after Federal Reserve Chairman Jerome Powell said he was watching bond-market moves to see if financial market conditions were tightening.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.567% climbed 7.8 basis points to 1.547%, its highest closing level since last February, while the 2-year note yield TMUBMUSD02Y, 0.136% was up 0.4 basis point to 0.145%. The 30-year bond yield TMUBMUSD30Y, 2.299% rose 5.7 basis points to 2.307%.

What’s driving Treasurys?

Powell said that the central bank would not sit back and let the financial market conditions tighten but he suggested the current rise in long-term bond yields was not worrisome for now.

Powell also said that the Fed would be “patient” with higher inflation expected this year, saying it was likely to be transitory.

Investors had been hoping Powell may offer more explicit details on how the central bank could keep bond yields capped if a Treasurys market selloff tightened financial conditions by lifting borrowing costs for the broader economy.

In U.S. economic data, weekly initial jobless claims rose to 745,000, from 736,000. U.S. factory orders rose 2.6% in January , with orders for durable goods climbing an unrevised 3.4% last month.

What did market participants say?

“Powell mainly stuck to the script. The Fed is fine with the rise in rates. When it becomes an issue is if its disorderly or when it affects financial conditions,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in an interview.

“Long-end rates is one part of financial conditions, but they’re not tilted towards any one particular component,” said Faranello.

By: Sunny Oh