Treasuries See Further Upside Amid Optimism About Interest Rates

Treasuries showed a lack of direction in early trading on Tuesday but climbed firmly into positive territory over the course of the session.

Bond prices gave back some ground in early afternoon trading but moved back to the upside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 5.3 basis points to 4336 percent.

With the drop, the ten-year yield added to 8.3 basis point slump seen on Monday, once again falling to its lowest closing level in over two months.

The strength that emerged in the bond market came on the heels of remarks by Federal Reserve Governor Christopher Waller adding to optimism the Fed is done raising interest rates.

Speaking at an American Enterprise Institute event, Waller said he is “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.”

Waller warned that he cannot say for sure whether the Fed has done enough to achieve price stability but expressed hope incoming economic data will help answer that question.

However, the buying interest generated by Waller’s remarks was partly offset by conflicting comments from Fed Governor Michelle W. Bowman.

Bowman said during a Utah Bankers Association and Salt Lake Chamber breakfast that she continues to expect the Fed we will need to increase rates further to keep policy sufficiently restrictive to bring inflation down to 2 percent in a timely way.

Meanwhile, traders continued to look ahead to the release of some key economic data in the coming days, including a report on personal income and spending that includes inflation readings said to be preferred by the Fed.

Trading on Wednesday may be impacted by reaction to a revised reading on third quarter GDP as well as the Fed’s Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.

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