Bond Report: Bonds retain gains as analysts view Powell comments as dovish

by | Feb 2, 2023 | Stock Market

Bonds held onto their gains on Thursday, a day after a press conference held by Federal Reserve Chair Jerome Powell convinced traders the rate-hike cycle was nearing an end.What’s happening
The yield on the 2-year Treasury
fell 1 basis point to 4.11%. Ahead of the Fed decision on Wednesday, the yield was 4.22%. Yields move in the opposite direction to prices.

The yield on the 10-year Treasury
was little changed at 3.42%.

The yield on the 30-year Treasury
was 3.57%.

What’s driving markets The Fed as expected lifted rates by a quarter-point, and somewhat unexpectedly, guided for at least two more increases. But investors were cheered by Powell’s press conference.

Unlike in December, Powell did not push back on the change in financial conditions that has seen assets like profitless tech stocks and bitcoin surge. Powell also frequently mentioned the disinflationary process, though he characterized it as being at an early stage. “Relative to FOMC press conferences, Powell tilted the balance of his remarks in the direction of embracing the recent disinflation. He also expressed far less worry about financial conditions and the divergence between the Fed’s policy rate path and the market’s,” said rate strategists at Bank of America. Traders will be looking ahead of rate decisions from the Bank of England and European Central Bank, as weil as host of economic indicators heading into Friday’s release of nonfarm payrolls. Traders also will be casting an eye on tech sector results, after Meta Platforms
well-received guidance and buyback announcement.

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