US bond yields remained largely unchanged in Thursday’s trade as investors awaited fresh signals on the Federal Reserve’s policy path from the Jackson Hole symposium, the first to be held under Chair Kevin Warsh.
The yield on the 30-year Treasury bond was flat at 5.185%, while the yield on the two-year Treasury note edged less than a basis point lower to 4.222%.
Warsh is set to deliver his first major speech as Fed chair on Friday. The address could offer fresh clues on the policy outlook after he faced criticism over a lack of clarity regarding his views on the economy and the future path of interest rates.
Ahead of the symposium, Kansas City Fed President Jeffrey Schmid said the current level of central bank rates is not providing sufficient restraint to the economy, suggesting that he still favours raising rates to bring inflation back to the Fed’s 2% target.
Meanwhile, global central banks continue to grapple with persistent inflationary pressures. Earlier on Thursday, Bank of Japan Deputy Governor Ryozo Himino said timely rate hikes would help avoid an inflation spike that could force abrupt monetary tightening later, although he stopped short of signalling an imminent rate hike.
The comments came after data in the previous session showed that inflation rose more than expected in July, strengthening expectations that interest rates could remain restrictive through the end of the year. Another report also confirmed that the US economy grew at a 1.5% annualised pace in the second quarter.
The combination of higher-than-expected inflation and resilient economic growth has boosted expectations of another Fed rate hike before the end of 2026.
Traders are currently pricing in no change to borrowing costs in September but see a 74% chance that the Fed will raise interest rates by at least 25 basis points by December, as elevated oil prices amid Middle East tensions continue to pose upside risks to inflation.
The Federal Reserve has been struggling to bring inflation back to its 2% target. Inflation has crept higher after the US imposed a wide range of tariffs globally and has climbed further as the Iran war disrupted global oil shipments through the Strait of Hormuz.
Bond yields remain volatile
Treasury yields have witnessed sharp moves in August, as higher oil prices and rising government spending fuelled inflation and fiscal concerns, pushing the yield on the 30-year US Treasury note to its highest level since 2007 last week.
Amid these developments, the US Treasury Department announced last week that it would at least double the size of its planned purchases of longer-term government debt. Treasury Secretary Scott Bessent also indicated that the repurchase programme could be expanded further.
The move also comes as global demand for US Treasuries has weakened in recent months, with Japan and China reportedly reducing their holdings amid growing concerns over large US budget deficits and persistently above-target inflation.
(With inputs from Reuters)
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