The 10-year Treasury yield rose Tuesday after Federal Reserve Chair Jerome Powell addressed the impact of tariffs on U.S. monetary policy.
The benchmark yield advanced 2.5 basis points to 4.251%. The 30-year bond yield was up 2 basis points at 4.777%. The 2-year note yield was up 5.4 basis points at 3.777%.
One basis point is equal to 0.01%, and yields and prices move in an inverse relationship.
“In effect we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said at a European Central Bank forum on central banking in Portugal.
Asked if U.S. authorities would have lowered rates again if U.S. tariffs had not been unveiled, Powell said, “I think that’s right.”
Bond market investors also studied U.S. economic data out Tuesday that showed a smaller-than-expected contraction in manufacturing. The ISM manufacturing index came in at 49.0 for June, above the Dow Jones consensus of 48.6. A reading below 50 indicates contraction.
The week’s data is highlighted by the June nonfarm payroll report, the key barometer into the health of the labor market, due on Thursday because of the July 4th holiday Friday. An earlier glimpse into the state of U.S. employment comes Wednesday with the release of June ADP private payroll numbers.
Investors are also following the progress of President Donald Trump’s tax and spending bill, which cleared the Senate Tuesday and now goes to the House for reconciliation between the two houses.
The package is set to be passed, said Vishnu Varathan, head of economics and strategy at Mizuho Securities. While it is projected to add $3.3 trillion in debt over the next decade, lower Treasury yields may take some of the edge off, he said.
Correction: The ISM manufacturing index came in at 49.0. A previous version misstated the reading.
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