Treasury yields fell sharply on Thursday, driven by comments from Federal Reserve Chairman Jerome Powell and a rise in U.S. jobless claims. The benchmark 10-year Treasury yield fell to 3.997%, marking its lowest point since February 2, 2024. The 2-year Treasury yield also declined, settling at 4.23%.
Key Developments
- Federal Reserve Comments: Powell suggested that a rate cut could be possible in September, following the Federal Reserve’s July meeting. He stated that the committee is considering reducing the policy rate as the economy approaches a more appropriate level for such a move.
- Quote from Powell: “The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate.”
- Economic Data: Recent data contributed to the drop in yields:
- Jobless Claims: Initial jobless claims rose to 249,000 for the week ending July 27, surpassing the Dow Jones forecast of 235,000. Continuing claims also increased to their highest level since November 2021.
- ISM Manufacturing Index: The index fell to 46.8, below the Dow Jones estimate of 48.9. A reading below 50 indicates a contraction in manufacturing activity.
Market Reactions
- Yields and Prices: Yields and prices move inversely. The decline in yields reflects investor responses to both Powell’s comments and the weaker economic data.
- Analyst Views: Adam Crisafulli of Vital Knowledge noted that the weak ISM manufacturing index highlights cooling domestic growth conditions and suggested that the Fed should have started easing sooner.
With three Federal Reserve meetings remaining this year, investors will be closely watching future economic data and Fed decisions
