The bond market traded in a narrow range on Tuesday, absorbing Federal Reserve Chair Janet Yellen's message that the U.S. economic recovery remains incomplete and early signs of a pick-up in inflation are not enough to accelerate anticipated interest rate increases.
Yellen's testimony before the Senate Banking Committee generated little market movement, with prices gyrating a few points above and below the day's opening level, reflecting market views that the loose monetary policy stance was not about to change.
Despite strong recent jobs reports and other signs of continuing recovery, Yellen emphasized she won't conclude the economy has recovered until wages start rising and discouraged workers return to the labor force.
"One small nuance change was her recognizing the labor market performance was better than expected. It is not a hawkish shift in tone, but it is a recognition that the labor market data had been better than they anticipated at the June meeting," said Michael Pond, global head of inflation market strategy at Barclays in New York.