US Treasuries trade modestly lower after Fed Vice Chair Fischer comments

The US Treasuries traded modestly lower Tuesday after Federal Reserve Vice Chair Stanley Fischer said that the pace of increasing Fed fund rate will be driven by the economy’s performance.

The yield on the benchmark 10-year Treasury note rose 1 basis point to 1.575 percent, the yield on 5-year note jumped 1 basis point to 1.186 percent and the yield on short-term 2-year note also climbed 1 basis point to 0.813 percent by 12:40 GMT.

Fed Vice Chair Fischer, speaking to Bloomberg, said that the rate path depends on the economy and the United States employment is very close to full employment. He further added that the productivity growth is very slow at the moment and world is becoming increasingly interconnected and the Fed is sensitive to what's going on around the world. In respect to rate hike added that he does not think can say 'one and done'.

Over the last weekend, Federal Reserve Vice Chairman Stanley Fischer stroke a hawkish tone during a speech in Colorado, saying that, looking ahead, he expects GDP growth to pick up in the coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes.

Moreover, Fischer signalled that this year interest rate hike is still on the table and added that the US economy is very near to meeting the Federal Reserve’s goals.

On Friday, at the Jackson Hole Symposium, Janet Yellen said that the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.

She further added that in light of the continued solid performance of the labour market and the Fed’s outlook for economic activity and inflation the case for an increase in the federal funds rate has strengthened in recent months. However, Yellen furthered that of course, the Fed’s decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.

Markets now look ahead to S&P/Case-Shiller Home prices and Conference Board Consumer Confidence releases on Tuesday, continuing their march towards the August employment report on Friday.

Meanwhile, the S&P 500 Futures traded flat at 2,178 by 12:40 GMT.