US government bonds extend rally as Trump keeps blasting Fed

NEW YORK – US Treasury yields slipped on Tuesday as President Donald Trump continued to lash out at Federal Reserve Chair Jerome Powell for not cutting interest rates ahead of the central bank’s policy meeting next week.

Tuesday’s price moves extended Monday’s bond rally, which was driven by technical demand and renewed investor worries over the economic impact of US tariffs. Those concerns continued to loom over the bond market, particularly given the limited amount of economic data releases on Tuesday and as Federal Reserve officials were in quiet mode ahead of the central bank’s rate-setting meeting next week.

“There’s not a lot of economic news coming out and we have the Fed meeting next week … so it feels like we’re in this very tight trading range where maybe some headline news may jolt the market a little bit,” said Douglas Gimple, senior portfolio specialist at Diamond Hill.

“I think everyone’s in wait-and-see (mode),” he said.

Yields, which move inversely to prices, were flat in early morning trade but declined later in the day.

Fed Chair Jerome Powell spoke at a Fed banking conference on Tuesday but did not comment on the economic outlook and on monetary policy. In a CNBC interview ahead of the conference, Fed Vice Chair for Supervision Michelle Bowman said the central bank’s ability to set monetary policy without political interference was “very important.”

Those remarks follow a recent escalation of US President Donald Trump’s criticism of the Fed and Powell for not lowering interest rates. At a news conference on Tuesday, Trump once again blasted Powell for keeping rates too high. “I think he’s done a bad job, but he’s going to be out pretty soon,” he said.

US Treasury Secretary Scott Bessent, who on Monday called for a review of the central bank’s operations outside of its core monetary policy mandate, said in an interview on Tuesday that there was no need for Powell to immediately step down.

Mark Hackett, chief market strategist at Nationwide, said Tuesday’s move lower in yields likely reflected some expectations that the US administration could “jawbone” monetary policy outcomes. The market is also assuming that the new Fed chair, after Powell’s term ends in May 2026, will probably be more dovish, Hackett added.

Investors do not expect the Fed to cut rates at the end of the Federal Open Market Committee (FOMC) meeting next week, but will be watching closely for any sign on when the central bank may shift to a more accommodative stance.

Next week will also be key because of an August 1 deadline on US tariffs that could see import duties rise significantly on a number of goods from US trade partners in the absence of trade deals over the coming days.

“Both of these issues are intimately tied together, of course, insofar as the Fed would likely be more inclined to delay a rate cut, perhaps to December, if the FOMC felt that uncertainty about the tariff outlook were growing, all else equal,” Thierry Wizman, global currency and rates strategist at Macquarie Group said in a note on Tuesday.

Benchmark 10-year yields declined by about three basis points to 4.338%, and two-year yields were down two bps to 3.833%.

On the supply side, the Treasury Department will sell 20-year bonds worth USD 13 billion on Wednesday and 10-year Treasury Inflation-Protected Securities worth USD 21 billion on Thursday.

(Reporting by Davide Barbuscia; Editing by Tomasz Janowski and Daniel Wallis)