US Treasury yields fall as market rebound fades

Yields on US Treasuries fell on Wednesday as risk aversion sentiment returned to global markets.

Shortly after 5:40 a.m. ET, the performance of the benchmark 10-year Treasury bond was down to 3.21%, while the yield on 30-year Treasury bond fell to 3.299%. Yields move inversely to prices.

Worries about a possible recession have weighed on investor sentiment in recent weeks, with analysts divided on its likelihood, timing and depth.

The Federal Reserve last week raised interest rates by 75 basis points, its biggest increase since 1994as it seeks to rein in inflation at its highest level in 40 years, but aggressive tightening could put further downward pressure on growth.

Market attention will turn Wednesday to Fed Chairman Jerome Powell’s testimony before Congress later in the morning. UBS Global Wealth Management said in a note that investors will need to see compelling evidence that inflation is easing before a reversal in market sentiment becomes likely.

“Controlling inflation today is less about wages and more about profits and pricing power. But the questions for investors are: consumer price inflation (or just gasoline prices ) became the inflation target? With trashed forward guidance, why should anyone believe anything Powell says??” said UBS chief economist Paul Donovan.

“Markets are oscillating between fears of recession and fears of inflation. Today it is fears of recession. Real wage growth is terrible in most major economies. However, consumers are cutting interest rates savings or increase borrowing in order to support demand, which limits the slowdown in growth.”

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