Bonds

10-year Treasury yield falls as Powell says taper of bond purchases still a ways off

Share

Treasury yields slid on Wednesday after Federal Reserve Chairman Jerome Powell said the central bank is still nowhere near tightening easy monetary policy.

The yield on the benchmark 10-year Treasury note fell 6 basis points to 1.36%. The yield on the 30-year Treasury bond dipped 5 basis points to 1.99%. Yields move inversely to prices.

Treasurys

Speaking to the House financial services committee, Powell said the labor market in particular is still well below where it was before the Covid-19 pandemic hit.

"At our June meeting, the Committee discussed the economy's progress toward our goals since we adopted our asset purchase guidance last December. While reaching the standard of 'substantial further progress' is still a ways off, participants expect that progress will continue," Powell said.

Fed officials foresee two hikes by the end of 2023, according to their projections in the so-called dot plot.

On the data front, companies paid much higher prices to producers in June with the producer price index rising 7.3% year over year, versus an estimate of 6.7%.

The hotter-than-expected PPI reading came a day after data showed the prices American consumers pay for goods and services accelerated at their fastest pace since 2008 last month. The consumer price index spiked 4.2% from a year ago, the Labor Department reported.

Producer prices measure the prices paid to producers as opposed to prices on the consumer level.

Dan Lacalle, chief economist at Tressis Gestion, told CNBC's "Squawk Box Europe" on Wednesday that he was concerned about the "sticky parts" of inflation.

"If we look at the rise in non-replicable goods and services, they are much faster than what we see in the headline CPI," he explained.

Lacalle was also concerned that central banks would "maintain the rhetoric and will maintain the view that inflation is transitory and it will not change their policy."

An auction will be held Wednesday for $30 billion of 119-day bills.