The US bond market was hit by a fresh round of selling after Federal Reserve chairman Jerome Powell said the central bankWhile Treasuries were little changed during Powell’s long-awaited speech in Jackson Hole, Wyoming, yields pushed up after it concluded as the hawkish message appeared to sink in.
The five-year real — or inflation adjusted — yield rose beyond 2.26 per cent after Powell spoke, hitting the highest level since 2008 and signalling that investors expect credit conditions to remain tight. “What did stand out from Powell’s speech was the reference to above-trend growth and the labor market,” said Kevin Flanagan, head of fixed income strategy at WisdomTree. “And if the jobs numbers continue to come in as they have, another rate hike is on the cards.”Futures traders are pricing in a roughly two-thirds chance that the central bank will raise its key interest rate by a quarter percentage point in November after a likely pause at its meeting next month.
Powell’s speech came on the heels of a downturn in the bond market this month, when long-term rates rose sharply as expectations of a recession recede.