U.S. Treasury yields increased on Wednesday as investors processed new economic data and recent statements from Federal Reserve Chairman Kevin Warsh. Warsh, speaking at the European Central Bank's annual policy forum in Sintra, Portugal, commented that "prices are too high" but offered no explicit hints on policy ahead of the July FOMC meeting. Traders are now pricing in a nearly 73% chance of the Fed keeping rates steady in July, and a roughly 65% chance of at least a quarter-point hike at the September meeting, according to the CME's FedWatch tool.
The yield on the benchmark 10-year Treasury note, a key indicator for various loans, rose by nearly 6 basis points to 4.481%. The shorter-term 2-year note saw a gain of almost 4 basis points, reaching 4.176%, while the 30-year Treasury yield increased by 7 basis points to 4.973%. These movements suggest the bond market is reacting to the possibility of the Fed maintaining a hawkish stance.
Adding to the market's considerations, new employment data showed private payrolls in June rose by 98,000, which was below the Dow Jones consensus forecast of 110,000. This softer labor market data comes just before the government's official monthly jobs report, due Thursday morning. Despite the employment figures, Warsh emphasized the Fed's commitment to restoring price stability and hinted at a long road ahead for reducing the central bank's balance sheet, suggesting it could take years rather than months.
