(Bloomberg) -- Treasuries dipped as traders anticipate Federal Reserve Chair Jerome Powell will reiterate monetary policy is on hold in remarks due later on Tuesday.
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US yields inched up as much as four basis points at the long end of the curve, with rates on 10-year bonds trading around 4.52%. A gauge of the dollar held steady after two days of gains.
The market’s focus will be on Powell’s testimony to the Senate Banking Committee for any clues on policy, after the Fed last month signaled an extended pause for rates. Treasuries have fallen in recent sessions as uncertainty around US President Donald Trump’s trade levies clouds the economic outlook, and Powell will likely be questioned on their potential impact to growth and inflation.
“Powell is likely to acknowledge the strength of the US economy, but also the risks on inflation,” said Mohit Kumar, a strategist at Jefferies, anticipating a repeat of the last Fed press conference. “We maintain the view of rangebound rates.”
Money markets held bets for around 36 basis points of easing from the US central bank by year-end. Inflation data out Wednesday could offer further evidence of a buoyant economy, after a solid January jobs report.
Bond traders will also be watching Treasury auctions beginning Tuesday with $58 billion of three-year notes, followed by 10- and 30-year issues over the subsequent two days. Analysts anticipate that yields will remain elevated until there’s a lot more clarity on where the economy is heading.
“With the new administration’s policies so uncertain, and so likely to change, the Fed can’t really be expected to plot a clear way forward,” said Steven Barrow, head of G-10 strategy at Standard Bank.
(Updates prices throughout.)
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