Bond yields rise as Fed officials say they’re in no hurry to cut rates


Bond yields rose on Friday, as a pair of Federal Reserve officials suggested the central bank was in no hurry to cut interest rates.

What’s happening

  • The yield on the 2-year Treasury
    BX:TMUBMUSD02Y
    was 4.75%, up 4.5 basis points. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    BX:TMUBMUSD10Y
    was 4.35%, up 2.3 basis points.

  • The yield on the 30-year Treasury
    BX:TMUBMUSD30Y
    was 4.47%, up 1.2 basis points.

What’s driving markets

Fed Gov. Lisa Cook, in a speech delivered late Thursday, said current monetary policy is restrictive but said she wanted greater confidence inflation is converging to 2% before cutting rates.

Fed Gov. Christopher Waller made a similar point, in an address Thursday that also was delivered in the evening. “I still expect it will be appropriate sometime this year to begin easing monetary policy, but the start of policy easing and number of rate cuts will depend on the incoming data,” said Waller.

Economists at Goldman say they now expect a total of 4 rate cuts this year, vs. 5 previously, but expect another 4 rate cuts in 2025, which would bring the federal funds rate between 3.25% to 3.5%.

“As strong activity data have piled up, Fed officials have become less concerned about the risk of keeping the funds rate too high for too long, which they had previously emphasized, and appear to have shifted toward our view that the largest risks from past rate hikes are behind us and cuts are therefore not urgently needed,” said the Goldman economists.

Former U.S. Treasury Secretary Larry Summers repeated his view, speaking at the FII Institute in Miami on Thursday, that the next move in interest rates could actually be up, citing the strength in the economy and “increasing evidence that inflation may be less down for the count than many people supposed.” He said four rate cuts — what the market is expecting — could well happen “but is a probably above the center of mass of what I think.”

Analysts at ING said it’s not likely the U.S. data story will move in a way favorable for U.S. Treasurys until after the release of the January PCE price index, which is due on Feb. 29.



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