Treasuries Rise as Powell Signals Taper on Course for This Year By Bloomberg

(Bloomberg) — Treasuries gained even in the wake of comments from Federal Reserve Chair Jerome Powell signaling that the central bank could begin paring its monthly bond purchases this year.

The remarks Friday at the Kansas Fed’s virtual Jackson Hole symposium kept intact the message traders already garnered from past comments by Powell and from the minutes of the central bank’s last policy meeting, in July — that most officials judged that it probably would be appropriate to begin paring the buying in 2021.

Ten-year yields fell 2 basis points to about 1.33% and the yield curve reversed an early-session move that sent it to the flattest level in a year. The Fed is currently buying $120 billion a month in bonds, part of emergency measures introduced last year to support the economy and help markets function smoothly.

Powell said in his remarks that the economy has now met the test of “substantial further progress” toward the Fed’s inflation objective that he and his colleagues said would be a precondition for tapering the bond purchases, while the labor market has also made “clear progress.” 

The yield curve, as measured by the gap between 5- to 30-year yields, was about 2 basis points steeper than Thursday’s closing levels, at about 111 basis points. The curve earlier in the session Friday touched around 107 basis points amid comments from other Fed officials that were deemed on the hawkish side in terms of pushing for a quicker start to tapering.

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