U.S. Treasury yields shifted higher on Wednesday as the bond-market selloff gained pace, following news reports that European Central Bank policymakers were unwilling to intervene to keep government debt yields from rising.
What are Treasurys doing?
The 10-year Treasury note yield
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What’s driving Treasurys?
ECB officials saw no need for drastic action to prevent bond yields from rising, as they felt changes to communications or maintaining the flexibility of its pandemic emergency purchase program, according to Bloomberg News.
Jens Weidmann, the governor of the Bundesbank, said on Wednesday the ECB had existing tools to deal with higher rates.
Nonetheless, the perceived shift in tone from the ECB sent U.S. and European government bond yields higher, after some senior ECB policymakers said they were closely monitoring the path of yields last week.
The 10-year German government bond yield
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Investors are now turning their attention to Fed Chairman Jerome Powell who is set to speak on Thursday. Chicago Fed President Charles Evans said he did not expect the Fed to change the maturities it weighted during its bond-buying operations but added the central bank still retained the flexibility to carry out such a tweak.
Read: If market thinks we’re not living up to inflation targets that’s ‘a problem,’ says Fed’s Evans
Markets mostly looked past the mixed U.S. economic data on Wednesday. Automatic Data Processing Inc. said private-sector payrolls rose by 117,000 in February, below economists’ forecast for 225,000 new jobs.
The Institute for Supply Management reported its index of activity among service-oriented firms such as banks, retailers and restaurants slipped to a nine-month low of 55.3%, from a two-year high of 58.7% in January. Any number above 50% represents an increase in industrial activity.
Meanwhile, the Fed’s Beige Book showed the U.S. economy expanded modestly over the six weeks ended in mid-February.
What did market participants say?
“Rates have reached a point that has, at least some, investors wondering if the backup in real yields (albeit still negative) isn’t eroding the Fed’s current stance of providing extremely accommodative monetary policy,” said Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets.
