By Karen Brettell
NEW YORK, Apr 28 (Reuters) – Treasury bond returns fell on Wednesday after Federal Reserve Chairman Jerome Powell said now is not the time to discuss reducing bond purchases. that the economy is still far from meeting the central bank’s inflation and employment targets.
* Analysts say the Fed is likely to begin hinting at an announcement about reducing stimulus in the coming months in order to prepare the market for smaller purchases, which could begin later this year.
* But Powell “made it very clear that they are quite a long way from downsizing,” said Tom di Galoma, managing director of Seaport Global Holdings in New York. “I think the Fed is still not sure how the economy will perform six months from now.”
* Following Powell’s comments, benchmark 10-year returns fell to 1.613%, from a two-week high of 1.661%.
* Economic data shows strong growth as businesses reopen following COVID-19-related closures, but it is unclear if the improvement will continue for more than a few months.
* US Gross Domestic Product data released on Thursday is expected to show strong growth in the first quarter, while next week’s employment data for April should also show an improvement in the labor market.
* The Fed is also facing the challenge of reducing support for bonds, as supply is likely to continue to rise. US President Joe Biden is launching new spending programs, and it will take time to raise new taxes that are designed to pay for them.
* Biden will address Congress on Wednesday with plans to spend at least $ 1.5 trillion on child care and college education and raise taxes on wealthy Americans.
* Inflation expectations, meanwhile, hit eight-year highs. The equilibrium rates on the 10-year inflation-protected Treasury securities considered an average annual inflation of 2.43% for the next decade.
(Edited in Spanish by Janisse Huambachano and Manuel Farías)