FX.co ★ US 10-Year Treasury Yield Extends Gains Amid Fed Chair Uncertainty

On Friday, the yield on the US 10-year Treasury hit 4.23%, marking its highest point in over four months. This surge was fueled by increased political tension surrounding the Federal Reserve and a shift in policy expectations. Reports of a criminal investigation involving Chair Jerome Powell, along with markets shifting towards Kevin Warsh as a potential successor, have raised concerns about the Fed's independence. Consequently, investors are demanding greater compensation for long-term debt. This trend is further bolstered by robust US economic data, such as strong industrial production and steady retail sales, which support the belief that economic growth is solid enough to maintain a prolonged period of higher interest rates. Investors are now focusing on next week’s PCE inflation and GDP data for more insight into inflation trends and the Fed’s decision-making process. If these reports do not show softer readings, long-term yields are likely to remain elevated. It should be noted that US bond markets are closed on Monday in observance of Martin Luther King Jr. Day.