U.S. government debt yields held steady on Tuesday after Federal Reserve Vice Chair Richard Clarida stressed the importance of policymakers being "data dependent" and more cautious about further rate hikes.
The Federal Open Market Committee's newest member said the Fed's monetary policy is "much closer" to a so-called neutral level that is neither stimulative nor restrictive than it was when it began its latest hiking cycle back in December 2015.
"A monetary policy strategy must find a way to combine incoming data and a model of the economy with a healthy dose of judgment — and humility! — to formulate, and then communicate, a path for the policy rate most consistent with our policy objectives," Clarida said in prepared remarks.
The yield on the benchmark 10-year Treasury note was largely unchanged at 3.066 percent at 11:58 a.m. ET, while the yield on the 30-year Treasury bond was up at 3.32 percent. Bond yields move inversely to prices.
Recent economic data — including strong GDP and employment prints — have prompted Fed's policy-making arm to defend its three increases to the overnight rate this year. Both the Fed and markets anticipate a fourth rate hike in December.
The current federal funds rate rose to 2.25 percent when the FOMC voted to bump the rate on September 26, 2018.
Clarida's speech "was kind of mixed, and my general feeling is that this Fed is really not going to change very much," said Tom di Galoma, head of Treasury trading at Seaport Global Holdings. "I do think the Fed is going to be a bit more data-dependent, but I don't see any reason for them to hesitate in lifting rates in December or back off rate hikes in both March and June."
Clarida's comments come a day before Chair Jerome Powell is due to participate in luncheon at the Economic Club of New York, which will be closely watched by investors to see if he comments on the state of monetary policy.