Bond Report: 10-year Treasury yield edges below two-month high ahead of Powell testimony

Bond Report

U.S. Treasury yields fell slightly on Tuesday as investors looked ahead to testimony from Federal Reserve Chairman Jerome Powell in Congress and U.S. Treasury Secretary Steve Mnuchin on the state of the economy.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.725%

was down 0.8 basis point to 0.734%, a day after touching a two-month high. The 2-year note rate
TMUBMUSD02Y,
0.177%

edged 0.4 basis point lower to 0.179%, while the 30-year bond yield
TMUBMUSD30Y,
1.448%

ticked 0.4 basis point higher to 1.460%.

What’s driving Treasurys?

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will testify in front of the Senate Banking Committee regarding the huge amount of fiscal and monetary stimulus spent to support the economy. Powell called on Congress on Sunday to deploy further fiscal spending even if it added to the U.S.’s widening deficits.

See: Fed’s Powell to urge Congress to ‘do everything’ it can to help those suffering amid pandemic

Minneapolis Fed President Neel Kashkari , Boston Fed President Eric Rosengren will also speak on Tuesday.

Bond yields surged on Monday after a phase one clinical trial for a coronavirus vaccine candidate showed positive results, buoying hopes that the COVID-19 disease could be curbed earlier than expected. The news weighed on haven assets as the S&P 500
SPX,
-0.33%

and Dow Jones Industrial Average
DJIA,
-0.67%

booked their biggest daily gain in around six weeks.

In U.S. economic data, housing starts for April fell 30% to 891,000 annual rate. MarketWatch-polled economists forecast, on average, new home construction to run at a yearly pace of 900,000 that month. Online retail sales data due Tuesday for the first-quarter could also provide a snapshot of consumer spending as households stayed at home.

What did market participants’ say?

“We doubt Fed Chair Powell’s testimony to the Senate Banking Committee will offer much new on fundamentals,” said Kenneth Broux, a FX and rates strategist at Société Générale.

“Powell may also face a battery of questions on the effectiveness and limits of monetary policy and the case for and against negative interest rates,” he said.

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