U.S. Treasury yields fell on Friday after Federal Reserve Chairman Jerome Powell signaled that interest rate cuts could be on the horizon.
The 10-year Treasury yield slid more than 7.5 basis points to 4.256%. The 2-year yield dropped 10 basis points to 3.69%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
Powell said during a speech at the Fed’s annual gathering in Jackson Hole, Wyoming, that financial conditions “may warrant” interest rate decreases. He also said that the central bank was moving “carefully” when it comes to monetary policy.
Powell also noted that while U.S. unemployment remains low, “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
Markets were last pricing in a more than 91% chance of an interest rate cut at the Fed’s September meeting, according to the CME Group’s FedWatch tool.
“Powell’s dovish Jackson Hole comments suggest the Federal Reserve is ready to cut interest rates in September, which is just what investors were hoping to hear, given the recent slowdown in the labor market,” said David Laut, chief investment officer at Abound Financial. “While there is still one more employment report before the September meeting, it’s clear the Fed has enough data under its belt to justify a September cut.”
