Ten-Year Yield Reaches New Sixteen-Year Closing High

Treasuries fluctuated over the course of the trading session on Thursday but largely maintained a negative bias throughout the day.

Bond prices came under pressure going into the close of trading, closing firmly negative. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 8.4 basis points to 4.988 percent.

The ten-year yield closed higher for the fourth consecutive session, once again reaching its highest closing level in over sixteen years.

The continued weakness in the bond market came as Federal Reserve Chair Jerome Powell delivered highly anticipated remarks at an Economic Club of New York luncheon,

Powell argued in prepared remarks that inflation is “still too high” and warned additional monetary policy tightening may be needed.

Powell noted that shorter-term measures of core inflation over the most recent three and six months are now running below 3 percent but cautioned these shorter-term measures are often volatile.

“In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.”

He added, “While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent.”

Powell described the current stance of monetary policy as “restrictive” and reiterated Fed officials are willing to keeping policy restrictive until they are confident inflation is on a downward path.

Citing recent data showing the resilience of economic growth and demand for labor, Powell also warned additional monetary policy tightening could be needed.

“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” he said.

Powell also addressed tightening financial conditions amid a recent increase in longer-term bond yields and said the Fed remains attentive to these developments, because persistent changes in financial conditions can have implications for the path of monetary policy.

Treasuries also moved lower following the release of a Labor Department report showing initial jobless claims unexpectedly declined to a nearly nine-month low in the week ended October 14th.

The report said initial jobless claims fell to 198,000, a decrease of 13,000 from the previous week’s revised level of 211,000.

Economists had expected jobless claims to inch up to 212,000 from the 209,000 originally reported for the previous week.

With the unexpected dip, jobless claims dropped to their lowest level since hitting 194,000 in the week ended January 21st.

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