NEW YORK- The US benchmark 10-year Treasury yield rose on Friday but held in the relatively tight range it has traded in this month as investors balanced uncertainty over the impact of tariffs with the likelihood that the Federal Reserve will keep rates unchanged for the time being.
Investors are worried that tariffs will increase inflation in the near term while also weighing on economic growth. Federal government layoffs are also expected to lead to higher unemployment.
So far, however, the impact of the new policies has not been captured in the economic data. That is leaving market participants and the US central bank to largely adopt a wait-and-see approach to where interest rates should be.
There is lack of conviction in the market, said Molly Brooks, US rates strategist at TD Securities.
Fed Chair Jerome Powell on Wednesday described the uncertainty faced by Fed policymakers as “unusually elevated.”
Yields fell earlier on Friday before drifting back higher and adding to gains after US President Donald Trump said his top trade chief plans to speak with his Chinese counterpart next week.
Trump reiterated his plan to use trade levies to help narrow the US trade deficit with its main economic rival, but said there will be flexibility in tariffs. He plans to introduce reciprocal tariff rates on countries globally on April 2.
New York Fed President John Williams said on Friday that it’s too soon to determine the impact of tariffs on inflation, adding that there are rising risks to the economic outlook and the central bank has time to decide the direction of its monetary policy.
