US Bond Traders Seek Cues From Powell on Next Move After Rout

(Bloomberg) — A three-day rebound in US Treasuries will be tested on Wednesday as investors await commentary from Federal Reserve Chair Jerome Powell and a bond auction.

The US 10-year yield was steady at 4.33% after erasing an earlier decline, as traders grapple with the aftermath of the worst rout in more than two decades. Shorter-dated two-year rates, which are more sensitive to monetary policy, were four basis points lower at 3.8%, paring an earlier drop after China said it was open to US trade talks.

US bonds have been whipsawed this month as President Donald Trump’s move to impose global tariffs raised threats to the economy, undermining Treasuries’ reputation as the world’s safest asset. Investors will be looking to Powell’s speech later Wednesday for clues on the Fed’s ability “to deal with market turmoil,” as well as guidance on interest rates, according to Hauke Siemssen, a strategist at Commerzbank AG.  

In addition, US retail sales rose substantially in March on a jump in car purchases and other goods such as electronics, suggesting consumers were scrambling to get ahead of tariffs. The Treasury will seek a repeat of the healthy demand seen for last week’s bond sales with a $13 billion offering of 20-year debt. That tenor has struggled to find a consistent buyer base since it was relaunched about five years ago. 

In a supportive move Tuesday, US officials said a possible rule change is under discussion that could lower trading costs for banks and reduce risks of a freeze-up of trading in the $29 trillion Treasuries market.

That step would be a relief for bank desks, which came under extreme pressure last week to cope with the flood of bond sales. The turmoil was so acute that US 30-year bonds briefly cheapened against their counterparts in the swaps market by as much as one full percentage-point for the first time on record. 

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