During Wednesday's trading, US government bonds demonstrated a steady upward trajectory, which followed on from a robust performance in the previous session. Bond prices started off strong and continued to show a steady positive growth throughout the day. Consequently, the yield on the standard ten-year note fell by 3.3 basis points, resting at 4.104 percent. This correlates with a drop in the ten-year yield of 8.2 basis points on Tuesday, making it the lowest closing value in a month.
The persistent strength of Treasury bonds was a response from traders to Federal Reserve Chair Jerome Powell's congressional testimony. Powell informed the House Financial Services Committee that the Federal Reserve may need to reduce interest rates at some point this year. However, he stressed that prior to doing so, there needs to be a higher certainty of inflation moving towards a steady 2 percent.
Predicting the economic outlook as uncertain, Powell expressed that consistent progress towards the Federal Reserve's 2 percent inflation goal was not guaranteed. He explained that if the policy's control was eased too much or too soon, it could reverse the inflation progress made so far, necessitating even stricter policies to bring inflation back to 2 percent. Conversely, if the restraint was eased too little or too late, it could unfairly undermine economic activity and employment.
Powell emphasized that future decisions on interest rates would hinge on a careful evaluation of incoming data, the changing outlook, and balance of risks.
On a separate note, a report from payroll processor ADP showed that private sector employment in the US grew by somewhat less than anticipated in February. According to ADP, employment increased by 140,000 jobs in February, following a revised increase of 111,000 jobs in January. Economists had forecasted a growth of 150,000 jobs, as opposed to the initially reported figure for the prior month of 107,000 jobs.
Powell is scheduled for another day of testimony on Capitol Hill on Thursday. Other factors like the weekly jobless claim updates and the US trade deficit reports might also influence trading.
