US Treasury yields rose on Monday after two Federal Reserve officials made bullish comments on inflation, less than a week after the US central bank was seen striking a dovish tone at its March policy meeting. Richmond Fed President Jeffrey Lacker said inflation was likely to accelerate in coming years and move toward the Fed's 2 percent target.
San Francisco Fed President John Williams told Market News International that he would advocate for another interest rate hike as early as the April policy meeting, noting "very encouraging" progress in inflation. "There were some hawkish comments from a couple of Fed officials, on the margin pointing to the potential for the Fed to continue with their new path of normalisation," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
Yields had fallen since the Fed last Wednesday gave a more dovish-than-expected outlook, projecting weaker growth and lower inflation this year and noting the United States continued to face risks from an uncertain global economy. International headwinds may keep the Fed on hold for longer even if US data continues to show a strengthening economy.
"Even if US data is strong the Fed has said it's not just domestic conditions that are keeping them from raising rates," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.Thin trading volumes ahead of Friday's public holiday were seen as exaggerating price moves. Investors preparing for some corporate debt sales, including a $2 billion deal from FedEx Corp may have also weighed on the market. Benchmark 10-year notes fell 11/32 in price to yield 1.92 percent, up from 1.87 percent on Friday. The 10-year note's yields have fallen from a 1-1/2-month high of 2.00 percent on Wednesday.
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