Treasury Yields Slip as Powell Pledges to Fight Inflation

Source: NYSE

U.S. Treasury yields dipped slightly on Tuesday as Fed Chair Jerome Powell detailed his plan to fight inflation if confirmed for a second term leading the central bank.

The yield on the benchmark 10-year Treasury note shed more than 3 basis points to 1.743% in afternoon trading. The 2-year yield was down slightly by 0.9%. The yield on the 30-year Treasury bond fell by more than 3 basis points to 2.075%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

The long-dated Treasury yields cooled on Monday, after moving rapidly higher during the first week of the year. The 10-year Treasury yield ended 2021 near 1.51%.

Powell testified before the Senate Committee on Banking, Housing and Urban Affairs on Tuesday, saying that the Fed intended to normalize monetary policy in 2022.

"We're really just going to be moving over the course of this year to a policy that is closer to normal. But it's a long road to normal from where we are," Powell said.

The price of bonds and stocks moved higher for the day after Powell began his remarks.

"Overall, Powell was not overly hawkish as he paved the way for a lengthy debate over balance sheet reduction, with his normalization comments taking away some of the importance over tomorrow's hot inflation report," Oanda senior market analyst Edward Moya said in a note to clients.

In addition, Kansas City Fed President Esther George also signaled a willingness to tighten policy at the Fed's March meeting.

December inflation readings will be the main economic data focus for investors this week, with the consumer price index set to be released on Wednesday and the producer price index slated for Thursday.

An auction was held for $52 billion of 3-year notes on Tuesday.

CNBC's Tanaya Macheel contributed to this market report.

Correction: St. Louis Fed President James Bullard's speech scheduled for Tuesday was canceled. An earlier version misstated the status of the event.

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