Bonds Extend Losses as Powell Says No Rush to Cut: Markets Wrap

This content was published on February 12, 2025 - 01:25

4 minutes

(Bloomberg) — Bond yields in Asia climbed after Federal Reserve Chair Jerome Powell signaled patience before cutting interest rates further and as investors look ahead to the upcoming CPI data.

Treasuries fell across the curve on Tuesday, with money markets still fully pricing in one rate cut by the Fed this year. Australia’s 10-year yield rose six basis points in early trading. Asian equities were mixed with Japanese stocks gaining while shares in Australia were steady ahead of Wednesday’s US inflation reading. Stock index futures pointed to gains for Hong Kong stocks.

The Fed doesn’t need to rush to adjust interest rates, Powell told Congress, largely echoing remarks in January, after the key policy rate was left unchanged following cuts at each of the last three meetings in 2024. Officials have signaled they are likely to hold rates steady until they see more progress on lowering inflation, and as they await further details on President Donald Trump’s economic-policy plans.

“If traders were looking for clues or intent about when another rate cut may occur, these were noticeably absent – by design,” wrote Tim Waterer, chief market analyst at KCM Trade in a note. With tariff outlook still looking clouded, “it’s easy to see why Powell didn’t fancy boxing himself in regarding the path of Fed policy in 2025.”

Key Inflation

As traders await a key US inflation reading later today, prices have showed scant signs of downward momentum at the start of the year. Healthy job growth has also buoyed the economy, backing the Fed’s stance to hold the line on interest rates for now.

Bureau of Labor Statistics figures due on Wednesday, shortly before the second half of Powell’s two-day testimony marathon, are forecast to show the consumer price index excluding food and energy rose 0.3% in January for the fifth time in the last six months.

“Recent inflation prints, coupled with a strong jobs market, will allow patience from the Federal Reserve who will likely hold policy at its target range of 4.25%-4.50% in March,” said Josh Hirt at Vanguard.

Money markets continued to fully price in just one quarter-point rate cut by the central bank this year, by September. In December, two 2025 cuts were priced in. A strong January jobs report released Friday prompted reassessment of the policy outlook, and January inflation data to be released Wednesday could do the same.

“With the labor market remaining strong and inflation still slightly above the Fed’s target, it’s not surprising that traders are pushing out prospects of another interest rate cut from the Fed toward the middle of the year,” said Matthew Weller at Forex.com and City Index.

In Asia, India’s rupee rallied by the most in over two years Tuesday on suspected strong intervention by the central bank, catching traders offguard after the currency hit a series of record lows in recent weeks. Vietnam’s dong fell to a record low against the dollar on Tuesday.

In commodities, oil edged lower after gaining Tuesday on signs that US sanctions were hampering Russian crude supplies. Gold was steady after volatile trading in its previous session saw it surge to a fresh peak above $2,942 an ounce, before paring back.

Key events this week: