(Bloomberg) — US 10-year Treasuries rose for a fifth day as Treasury Secretary Scott Bessent offered support for Federal Reserve Chair Jerome Powell, reassuring investors.
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“The market has taken solace from these comments, the inference being that Trump has been convinced, yet again, not to pursue his campaign to remove Powell,” Ian Lyngen, head of US rates strategy at BMO, wrote in a note.
Powell’s future has become a key issue for bond investors as the Fed chief has come under fire from President Donald Trump for holding interest rates steady while waiting to see if trade tariffs impact inflation. Bessent, speaking Tuesday on Fox Business, said if Powell wants, he should stay in the post until his term ends in May.
Yields settled three to four basis points lower across maturities, with the 10-year’s falling to 4.34%, the lowest level since early July.
With few major US economic data releases and Fed speakers in a blackout period ahead of next week’s meeting, traders are shifting their attention to next week’s Treasury Department announcement of projected auction sizes for the quarter, said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights.
“Growing comfort that Treasury will be maintaining nominal coupon auctions at current sizes for the foreseeable future may be assuaging supply/demand imbalance concerns,” he said.
Yields have come down significantly over the past week. The 10-year’s has moved below its 200 day average and rates on shorter-dated notes — which are more sensitive to changes in monetary policy — have fallen more than 10 basis points.
“Markets priced in cuts late this year. With the increasing focus on the next leadership at the Fed, the rate cuts shall be forthcoming,” said Andrzej Skiba, head of BlueBay US fixed income at RBC Global Asset Management. “So there’s a ‘yield FOMO’ where you have to lock in yields before they are no longer there.”
Interest-rate swaps show a 57% chance the Fed will cut rates at its meeting in September with traders leaning toward two, 25-basis-point reductions by the end of the year.
Powell Pressure
Trump and some members of his administration view Powell as a hurdle to lower borrowing costs as they seek to refinance trillions in upcoming debt. Treasuries fell sharply last week after headlines flashed that the president was planning to fire Powell, a claim quickly denied by Trump.
