US treasuries edge higher as Bessent offers support for powell

The rate on the two-year, which is particularly sensitive to changes in monetary policy, fell to 3.83%, the lowest level since July 3.

Treasuries rose, reversing earlier losses, as Treasury Secretary Scott Bessent said he sees no reason for Jerome Powell to step down as Federal Reserve chair.

Yields on Treasuries fell about 3 basis points across maturities. The rate on the two-year, which is particularly sensitive to changes in monetary policy, fell to 3.83%, the lowest level since July 3.

Powell’s future has become a key issue for bond investors as the Fed chief has come under fire from President Donald Trump for holding interest rates steady while waiting to see if trade tariffs impact inflation. Bessent, speaking Tuesday on Fox Business, however, said if Powell wants, he should stay in the post until his term ends in May.

“There could be some relief, at least for the longer end of the curve, that Bessent supports Powell remaining chair until the end of his term,” said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights.

With few major US economic data releases, and Fed speakers in a blackout period ahead of next week’s meeting, traders are shifting their attention to next week’s Treasury Department announcement of projected auction sizes for the quarter, Griffiths said.

“Growing comfort that Treasury will be maintaining nominal coupon auctions at current sizes for the foreseeable future may be assuaging supply/demand imbalance concerns,” he said.

Benchmark 10-year notes extended gains to a fifth day with the yield dipping to 4.35%, about 13 basis points lower than its level a week ago.

Powell Pressure

Trump and some members of his administration view Powell as a hurdle to lower borrowing costs as they seek to refinance trillions in upcoming debt. Treasuries fell sharply last week after headlines flashed that the president was planning to fire Powell, a claim quickly denied by Trump.

Deutsche Bank AG strategists estimated Powell’s ousting would drive 30-year yields up by more than a half a percentage point. The yield stood at about 4.91% on Tuesday in New York.

The strategists said the clearest hedge against risks to the Fed’s independence — and a situation in which US government spending consumes monetary policy — are bets on steeper yield curves.