Ten-Year Yield Drops To Lowest Level Since February As Treasuries Extend Advance

Following the strong upward move seen in the previous session, treasuries saw continued strength during trading on Wednesday.

Bond prices moved to the upside early in the day and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.9 basis points to 1.321 percent.

The ten-year yield extended the downward trend seen over the past several sessions, ending the day at its lowest closing level since February.

Treasuries remained positive following the release of the minutes of the Federal Reserve’s latest monetary policy meeting, which suggested the central bank will not be in a hurry to begin scaling back its asset purchase program.

The minutes of the June meeting reiterated Fed Chair Jerome Powell’s view that “substantial further progress” towards the goals of maximum employment and price stability has not yet been met.

The Fed has repeatedly said it plans to continue to its asset purchases at a rate of at least $120 billion per month until “substantial further progress” has been made toward its goals.

While various participants expect conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had previously anticipated, others saw incoming data as providing a less clear signal about the underlying economic momentum.

The minutes said some participants determined the Fed would be able to make a better assessment in the coming months and emphasized the central bank should be “patient in assessing progress toward its goals and in announcing changes to its plans for asset purchases.”

The Fed said participants agreed to continue assessing the economy‘s progress toward the central banks goals at coming meetings and to begin to discuss their plans for adjusting the path and composition of asset purchases.

“In addition, participants reiterated their intention to provide notice well in advance of an announcement to reduce the pace of purchases,” the Fed said.

Paul Ashworth, Chief U.S. Economist at Capital Economics, described the Fed minutes as “a little less hawkish than feared.”

“The minutes of the Fed’s mid-June FOMC meeting were not as hawkish as we suspected, given the shift in the median interest rate projection, which now shows two rate hikes in 2023, and post-meeting comments by various officials,” Ashworth said.

He added, “In particular, there seems to be only limited support for beginning to taper the monthly asset purchases anytime soon.”

Ashworth said it still appears that the Fed won’t begin tapering its asset purchases until the start of next year but noted a pre-announcement could come as soon as September.

Following a couple relatively quiet days on the U.S. economic front, trading on Thursday may be impacted by reaction to the weekly jobless claims report.

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