By Dhirendra Tripathi
Investing.com – The yields on U.S. Treasury bonds moved lower on Tuesday despite comments from Dallas Federal Reserve Bank President Robert Kaplan that he expects rates to rise.
While inflation is not a problem, he said on CNBC, the central bank could lift rates before the end of next year. Kaplan also said he sees the 10-year Treasury rising to 1.75% to 2%, which would put it near where it was in February 2020. "I don't see why as we recover that the 10-year won't back up further," he said. "I think that'll be a healthy signal."
His comments come as Federal Reserve Chairman Jerome Powell prepares to testify in Congress later Tuesday. Late Monday, his prepared statement for the hearing said that the recovery is far from complete and the Fed would continue to provide the economy the support it needs for as long as it takes.
The United States 10-Year touched 1.65% from 1.70% earlier while yield on the United States 30-Year hit 2.36%. The 30-year note yield was at 2.40% before that. One basis point is one-hundredth of a percentage point.
Last week, the 10-year yield touched a 14-month high of 1.75% while the 30-year bond hit 2.51%. The 30-year yield was its highest since August 2019. Yields move inversely to prices.
Notwithstanding the Fed’s statement last week that easy money policy would continue through 2023 and that no rate hike was on the horizon, market watcher have had their doubts. With economy recovery happening at a faster-than-expected pace and unemployment falling, many still feel the Fed could hike rates earlier than what it says.
The Fed has said it would look to restore all the jobs lost due to the pandemic, again an assertion that many are not buying as they fear inflation could rear its head before that.
Kaplan said on Tuesday that while that the country is still in the depths of a recession, he is among the policymakers expecting the central bank to start raising rates as soon as next year.
Today is the first time Powell and Treasury Secretary Janet Yellen will make their first joint appearance in front of the U.S. House Committee on Financial Services to discuss their response to the coronavirus pandemic.
In his prepared remarks, Powell said the economic recovery from the pandemic had “progressed more quickly than generally expected and looks to be strengthening.”