Bond Report: U.S. Treasury yields edge lower as Powell speech draws focus

United States

U.S. Treasury yields traded slightly lower in early Thursday trade before weekly jobless claims data and a speech by Federal Reserve Chairman Jerome Powell at noon.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.470% fell a basis point to 1.460%, while the 2-year note yield TMUBMUSD02Y, 0.140% stood still at 0.141%. The 30-year bond yield TMUBMUSD30Y, 2.260% slid 0.9 basis point to 0.242%.

What’s driving Treasurys?

Powell is set to speak at The Wall Street Journal jobs summit at 12 p.m. ET, where he will discuss the labor market.

Investors are 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.

The concern is the Fed Chairman may maintain the central bank’s previous guidance on monetary policy and dismiss the rise in long-term government bond yields that continue to drive investor jitters.

Still, a few market participants hold out hope that Powell may offer more to bond traders, with some analysts suggesting Powell could hint at an extension of regulatory relief for large banks to encourage Treasury bond purchases.

See: Record $ 414 billion of new Treasury debt issuance poses supply test for shellshocked bond buyers

In U.S. economic data, weekly initial jobless claims are expected to rise to 750,000, up from 730,000 when published at 08.30 a.m.

What did market participants say?

“The key focus for today will be the on-going ‘risk-off’ in equity markets and what Fed Chair Powell hints about future bond buying needs,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.