Treasury Yields Change Little Following Fed Chair Testimony
This article was originally published on ETFTrends.com.
Treasury yields changed little following Federal Reserve Chairman Jerome Powell's semiannual monetary policy report today to the Senate Committee on Banking, Housing, and Urban Affairs, citing that the strength of the economy is prime for "gradually raising the federal funds rate."
The yield on the benchmark 10-year Treasury note inched higher to 2.858 percent at 1:15 p.m. ET. Meanwhile, the 2-year Treasury yield inched up by 1.2 basis points to 2.615 percent and the yield on the 30-year moved slightly slower to 2.964 percent.
Related: Active ETFs to Help Fixed-Income Investors Navigate Rising Rates
Compared to a year ago, the yield on the benchmark Treasury has increased by 32.4 percent and 18.3 percent year-to-date.
Powell is expected to face a barrage of questions from lawmakers on various topics, including interest rates, the effect of trade wars on monetary policy and inflation. An ongoing concern is chatter within the markets regarding the 2-year and 10-year Treasury yield curves inverting--a possible signal that the economy could head into a recessionary state.
“I think what really matters (about the yield curve) is what the neutral rate of interest is,” said Powell. “And I think people look at the shape of the curve because they think that there’s a message in longer-run rates, which reflect many things, but that longer-run rates also tell us something, along with other things, about what the longer-run neutral rate is. That’s really, I think, why the slope of the yield curve matters. So I look directly at that.”
Related: Global Fixed Income Views: Q3 2018
Corporate Bond ETFs Gain
Fixed-income ETFs in the corporate bond space moved higher amid Powell's recent comments, signaling the continued trend by fixed-income investors moving into higher-yield, higher-risk debt securities as the Fed continues its hawkish view of the economy. The iShares iBoxx $ High Yield Corp Bd ETF (HYG) gained 0.11%, Vanguard Short-Term Corporate Bond ETF (VCSH) edged 0.04% higher and PIMCO 0-5 Year High Yield Corp Bd ETF (HYS) gained slightly at 0.05%.
“If you have a bond portfolio that’s mixed, the Treasury portion of your portfolio is probably challenged and the high-yield portion is probably doing well,” said ETF Trends President Tom Lydon.
For more trends in fixed income, visit the Fixed Income Channel.
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