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Bond Report: Treasury yields rise with 10-year around 2.95% as U.S. April retail sales climb

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Treasury yields rose slightly Tuesday as investors awaited a reading on U.S. April retail sales and remarks by Federal Reserve Chairman Jerome Powell.

What yields are doing

The 10-year Treasury note yield
TMUBMUSD10Y,
2.916%

rose to 2.918%, up from 2.877% at 3 p.m. Eastern on Monday

The 2-year Treasury note
TMUBMUSD02Y,
2.632%

yielded 2.624% versus 2.568% on Monday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.115%

was 3.116%, rising from 3.084% late Monday.

What’s driving the market

Investors looking for clues to the Federal Reserve’s plans for hiking interest rates further and otherwise tightening monetary policy as it attempts to get to grips with persistently high inflation will be tuned in to a flurry of speeches by Federal Reserve officials Tuesday, particularly comments by Powell.

The Fed chief will speak at 2 p.m. at The Wall Street Journal’s Future of Everything conference. Powell last week acknowledged that the Fed likely should have moved earlier to begin tightening policy in response to inflationary pressures. In a radio interview, he also said that the Fed’s ability to achieve a so-called soft landing, a term for tightening monetary policy without sending the economy into a deep downturn, wasn’t fully within the control of policy makers.

Over the course of Tuesday, investors are also set to hear from St. Louis Fed President James Bullard, Philadelphia Fed President Patrick Harker, Minneapolis Fed President Neel Kashkari, Cleveland Fed President Loretta Mester and Chicago Fed President Charles Evans.

Data on U.S. April retail sales is due at 8:30 a.m. ET. Economists surveyed by The Wall Street Journal look for sales to show a 1.1% rise, while sales excluding vehicles were seen up 0.5%.

Data on April industrial production and capacity are due at 9:15 a.m., while a May home builders’ index was set for release at 10 a.m.

What analysts say

“I think the question of ‘soft landing or hard’ will be uppermost in peoples’ minds,” said Marshall Gittler, head of investment research at BDSwiss Holding, in a note. “Also I’d expect [Powell] to reaffirm that he’ll be shooting for 50 bps (basis points) hikes at each of the next two meetings and is not considering a 75 bps hike. Any hints that a 75 bps hike might be possible would be big news.”

“Inflation is the primary driver of the policy outlook at the moment, so a moderately weaker than expected retail sales report should have only a modest impact at the front end of the curve,” said Alex Pelle, U.S. economist at Mizuho Securities, in a note.

“On the flip side, a weak retail sales would support our view that forward earnings expectations have room to come down, and the corresponding pressure on equities will also reinforce our view that long rates are close to the upper end of their range at current levels,” Pelle wrote.

See interviews with Fed Chairman Jerome Powell, the CEOs of companies including Wells Fargo, Moderna and FanDuel. Register for virtual access to The Wall Street Journal’s Future of Everything Festival, May 17-19. (Select virtual pass for complimentary access.)

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