Short-dated U.S. Treasury yields moved higher on Aug. 28 as Federal Reserve Chair Waller stressed that policymakers still need to restrain consumer price increases. His remarks eased some market concern about the Fed’s willingness and ability to keep fighting inflation, while prompting selling in shorter-maturity Treasuries and gains in longer-dated bonds. During the speech, the 2-year Treasury yield rose 5 basis points to 4.28%, while the 30-year yield fell 1 basis point to 5.19%.
The moves pointed to market expectations that the Fed may still need to lift short-term rates. Traders have questioned Waller’s policy stance since his first press conference in June, when he struck a hawkish tone and said inflation needed to be pushed lower. U.S. inflation has remained above the Fed’s 2% target since the global economy reopened from the pandemic in 2021. Although the Fed left rates unchanged again in July, Waller did not say whether another rate increase could come this year.
On Friday, Waller said inflation had not shown meaningful slowing and warned that policymakers must be confident price pressures are improving, or the central bank still has more work to do. He also repeated that the Fed will bring inflation back to its 2% target, calling that goal clear and fixed.
U.S. short-term Treasury yields rose on Aug. 28 after Federal Reserve Chair Waller said the central bank still needs to restrain consumer price increases, according to BlockBeats. His remarks eased some of the market’s concern about the Fed’s anti-inflation resolve.
Short-dated Treasuries sold off during the speech
While Waller was speaking, short-dated Treasuries came under selling pressure, while long-dated bonds gained. The 2-year Treasury yield rose 5 basis points to 4.28%, and the 30-year yield fell 1 basis point to 5.19%.
Both moves signaled that the market sees a chance the Federal Reserve may still need to raise short-term interest rates.
Traders have questioned his stance since June
Bond traders have been uncertain about Waller’s policy position since his first press conference in June. At that time, he said inflation needed to be pushed lower and showed a hawkish stance.
U.S. inflation has remained above the Federal Reserve’s 2% target since the global economy reopened from the pandemic in 2021. But after the Fed left rates unchanged again in July, Waller did not indicate whether a rate increase could still happen this year.
Long-dated Treasury yields then rose sharply as traders demanded higher returns to compensate for the risk of worsening inflation.
Waller says the 2% target remains fixed
On Friday, Waller warned that inflation has not shown meaningful slowing. He said policymakers must be confident inflation is improving, or the central bank still has more work to do.
He also repeated that policymakers will bring inflation back to the 2% target and said that goal is clear and fixed.
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