Treasuries See Further Downside Ahead Of Powell Testimony

Treasuries showed a lack of direction in morning trading on Monday before drifting lower over the course of the afternoon.

Bond prices slid more firmly into negative territory after spending the morning bouncing back and forth across the unchanged line. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 1.370 percent.

The ten-year yield closed higher for the sixth time in the past seven sessions, reaching its highest closing level in a year.

The continued weakness among treasuries came as optimism about further stimulus and accelerated coronavirus vaccine rollouts reduced the appeal of safe havens such as bonds.

Democrats continue to move forward with President Joe Biden’s proposed $1.9 trillion relief package, with the House expected to vote on the legislation later this week.

The Democrat-controlled House is expected to approve the bill largely along party lines, but the package could face additional hurdles in the Senate.

Traders were also looking ahead to two days of Congressional testimony by Federal Reserve Chair Jerome Powell.

Powell is likely to reiterate that the Fed plans to maintain easy monetary policy for the foreseeable future as the economy continues to recover from the coronavirus pandemic.

The Fed has recently signaled that it is not concerned about inflation, suggesting that inflation should exceed its 2 percent target for some time before the central bank considers raising interest rates.

In U.S. economic news, the Conference Board released a report showing a bigger than expected increase by its index of leading U.S. economic indicators in the month of January.

The Conference Board said its leading economic index climbed by 0.5 percent in January after rising by an upwardly revised 0.4 percent in December.

Economists had expected the leading economic index to rise by 0.3 percent, matching the increase originally reported for the previous month.

Trading on Tuesday may be driven by reaction to Powell’s testimony, with the Fed chief due to appear before a virtual Senate Banking Committee hearing.

Bond traders may also keep an eye on the results of the Treasury Department’s auction of $60 billion worth of two-year notes.

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