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

(Bloomberg) — Bond yields 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. Treasuries held steady in Asian trading while Australian and Japanese 10-year yields gained. The yen declined for a third consecutive day. Hong Kong stocks rallied, resuming a tech-powered rally.

Investors are holding back on risky bets ahead of Wednesday’s CPI data even as Powell told Congress that the Fed doesn’t need to rush to adjust interest rates, indicating how the economy remained strong. The Fed chair’s comments largely echoed remarks in January, after the key policy rate was left unchanged following cuts at each of the last three meetings in 2024.

“The market is taking Powell’s comments in stride,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. “Few believed that Fed was quick to the trigger on further rate cuts, though the door remains open for some easing later in the year.” 

The Japanese yen was the worst performer among its Group-of-10 peers on Wednesday. The yen is being sold by leveraged accounts on speculation Japan’s petition for an exemption from US steel tariffs will be rejected, according to an Asia-based FX trader.

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.

The technology theme continued to impact stocks in China. Alibaba Group Holding Ltd. rose as much as 8.6%, the most since September 2024, after The Information reported that Apple Inc. is partnering with the company to bring AI features to products in China. DeepSeek news has also helped lift the Hang Seng Index with UBS strategists including James Wang saying that the rally in Chinese stocks spurred by DeepSeek’s artificial intelligence app may be “less than halfway” done. 

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.

In commodities, oil edged lower after an industry report indicated a large increase in US crude stockpiles. 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:

• US CPI, Wednesday
• Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
• Fed’s Raphael Bostic and Christopher Waller speak, Wednesday
• Eurozone industrial production, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone GDP, Friday
• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 11:26 a.m. Tokyo time
• Japan’s Topix fell 0.2%
• Australia’s S&P/ASX 200 rose 0.3%
• Hong Kong’s Hang Seng rose 2%
• The Shanghai Composite was little changed
• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0364
• The Japanese yen fell 0.6% to 153.45 per dollar
• The offshore yuan was little changed at 7.3104 per dollar

Cryptocurrencies

• Bitcoin fell 0.4% to $95,962.89
• Ether fell 0.5% to $2,610.15

Bonds

• The yield on 10-year Treasuries was little changed at 4.54%
• Japan’s 10-year yield advanced one basis point to 1.325%
• Australia’s 10-year yield advanced six basis points to 4.45%

Commodities

• West Texas Intermediate crude fell 0.4% to $73.02 a barrel
• Spot gold fell 0.1% to $2,894.52 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Toby Alder.

©2025 Bloomberg L.P.