Treasuries Recover Ground As JPMorgan Sees Lingering Powell Risk

US Treasuries pared some of their weekly losses on Friday while the dollar fell at the end of a week dominated by debate about the trajectory and leadership of the Federal Reserve.

Yields on 10-year US government bonds inched lower to 4.45% — just three basis points higher on the week — while 30-year yields were on track to finish below 5% for the first time since Monday. A gauge of the dollar dropped 0.2% after a Fed policymaker publicly pushed to cut interest rates later this month.

It’s been a volatile week for Treasuries. The 30-year yield breached 5% for the first time since May as enduring inflation pressures prompted traders to pare odds of a September rate cut, while speculation that President Donald Trump might fire Fed Chair Jerome Powell also unnerved markets.

“Even with President Trump denying any near-term plans to remove Powell, uncertainty remains elevated, likely contributing to a lingering discount in long-term Treasuries,” wrote JPMorgan Chase & Co. strategists led by Jay Barry.

Meanwhile, this week saw option traders increasingly hedge the possibility of faster rate reductions than the market has priced in, as they wagered the next Fed chair — whenever they take up the mantle — will be more inclined to lower interest rates.

Indeed, the Fed’s Christopher Waller, who has been touted as a potential successor to Powell, said policymakers should cut interest rates this month to support a labor market that is showing signs of weakness.

Data on housebuilding and PMIs are on the slate next week, adding to the picture of the US economy.