Treasury demand shows resilience as Fed signals decline in bond purchases

Investors continue to buy US Treasuries, defying expectations of a sell-off that would bring bond yields back to their March highs.

Yields, which move in the opposite direction of bond prices, have held steady in recent weeks after rising sharply in the first quarter and then falling in the following months as investors downgraded some of their most significant economic forecasts. optimistic.

Many Wall Street analysts and investors continue to argue that yields should rise on the basis of surging inflation in the United States, continued strong economic outlook and looming reduction in central bank bond purchases. . But so far the market has not cooperated, reflecting continued demand from around the world.

The Treasuries cleared their last big hurdle on Friday when Federal Reserve Chairman Jerome Powell gave a much-anticipated speech at the annual central bank symposium hosted by the Kansas City Fed. Analysts thought Mr Powell could offer clues as to when the Fed may start cutting its $ 120 billion in monthly asset purchases, including $ 80 billion in Treasuries, the type of move that has thrills the bond market during the taper tantrum of 2013.

Mr Powell complied, to some extent, saying he thought the process could likely start before the end of the year. Yields, however, fell when his prepared remarks were made public, underscoring the market’s near indifference to the cut since the topic arose late last year.