A sell-off in US Treasuries eased on Tuesday after Federal Reserve chair Jay Powell said the central bank will act as appropriate to sustain the US economic expansion.

US government bonds had looked set to snap their five-day rally, with the yield on the two-year Treasury up as much as 8.9 basis points to 1.9215 per cent having hit a 17-month low on Monday. Yields move inversely to price.

However, yields trimmed their gains after Federal Reserve chair Jay Powell said the Fed will “act as appropriate to sustain the expansion” as it monitors the economic impact of escalating trade wars. At pixel time the yield on the two-year, which is more sensitive to monetary policy, was up 4.9 basis points to 1.8914 per cent.

Similarly, the yield on the US 10-year had climbed as much as 6.2 basis points but trimmed that increase following Mr Powell’s remarks and was up 4.6 basis points to 2.121 per cent at pixel time. The 10-year had declined to its lowest level since September 2017 in the previous session.

The decline in Treasuries follows the largest five-session streak for the two-year since 2008. Traders had in recent days ramped up bets that the US central bank will cut interest rates this year as the White House embarked on a two-front trade war with China and Mexico.

It also accompanied a rebound in US stocks, with tech recouping some of its losses after antitrust fears wiped more than $130bn from tech giants on Monday.

Investors also appeared to shrug off trade fears amid reports that China’s commerce ministry urged dialogue to resolve the conflict between the world’s two largest economies.

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