U.S. Treasuries, which had been hit earlier this week by rising bets on Donald Trump’s return to the White House and the fiscal implications of his campaign promises, have calmed somewhat since Powell spoke in Portugal on Tuesday.
Ten-year yields have slipped back to 4.43% from peaks close to 4.5% set on Monday – when betting markets pushed former President Trump’s chances of beating incumbent Joe Biden in November to more than 60% after Biden’s dire TV debate performance last week.
Still inverted U.S. Treasury yield curves had steepened into the new week as a result, with the New York Fed’s estimate of the 10-year term premium demanded by investors to hold longer-term government debt flipping back positive for only the third time this year.
Although still signalling no rush to cut interest rates, Powell offered markets some encouraging noises by saying the United States is back on a “disinflationary path.”
Part of his discussion was how the Fed needs to keep a balance between sustaining the economy and bearing down on inflation – salient in a week seeing further signs of cooling growth and with critical labor market readouts.
An unexpected jump in U.S. May job openings, however, went slightly off script – although it’s a month older than most of this week’s employment reports.
Wednesday sees ADP’s private sector jobs data for June, weekly jobless claims and June layoffs data – alongside service sector surveys for last month too.
And that all precedes the release of minutes from the last Fed policy meeting.
