TREASURIES-US long-dated yields hit multi-week highs as Fed's Powell in focus

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US yield curve steepens amid speculation on Fed's Powell

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Bond market shrugs off tariff talk

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Investors brace for CPI on Tuesday

(Adds comment, Russia news, updates Treasury yields)

By Gertrude Chavez-Dreyfuss

NEW YORK, July 14 (Reuters) - U.S. long-dated Treasuries were under pressure on Monday in choppy trading, pushing their yields to multi-week peaks in line with global bond markets, as investors weighed the prospect of Federal Reserve Chairman Jerome Powell's potential exit from the central bank.

Bond investors also largely shrugged off U.S. President Donald Trump's threat to impose a 30% tariff on imports from the European Union and Mexico, two of the largest U.S. trading partners from August 1.

The EU extended its pause on retaliatory measures, however, until early August, holding out hope for a negotiated truce. The White House said talks with the EU, Canada and Mexico are still ongoing.

But Powell's fate at the Fed, on the other hand, seems to be increasingly the focus for investors. President Donald Trump and Treasury Secretary Bessent have long advocated for lower interest rates to ease the burden on the government's interest cost, as the Fed held interest rates steady at the 4.25%-4.50% range for all four of its policy meetings this year.

Lately, however, the Trump administration has been zeroing in on what it felt were renovation cost overruns at the Fed's Washington headquarters. White House economic adviser Kevin Hassett said on Sunday that the Fed "has a lot to answer for" on its $700 renovation cost overruns.

"Talks on Powell being fired are more Trump and his administration voicing their disdain for his stance on monetary policy than a real threat," said John Luke Tyner, head of fixed income and portfolio manager at investment adviser Aptus Capital Advisors in Fairhope, Alabama.

"I think firing Powell would be very bad for markets in the short run as it would be a blatant attack on Fed independence, although I could easily make the argument the Fed is not that independent at the current juncture."

U.S. Treasury 30-year yields climbed to five-week peaks just shy of 5%, and were last up 1.4 basis points (bps) at 4.971%. The earlier rise in U.S. 30-year yields mirrored movements in their counterparts in Germany and on Monday, its highest since October 2023, taking its cue from Japan's bond market.

The yield on the 20-year Japanese government bond surged to its highest since 2000 while 30-year yields neared an all-time high, as concerns grew that an upcoming election there could pave the way for increased fiscal spending.

On the front end of the curve, U.S. two-year yields slipped 1.8 bps to 3.896%.

The bond market overall showed little reaction to news that Trump has finally taken a tough stance on Russia. Trump announced new weapons for Ukraine on Monday, and threatened to hit buyers of Russian exports with sanctions unless Russia agrees to a peace deal in 50 days. This was a major shift in policy brought on by frustration with Moscow.

EYE ON POWELL, CPI

"The strategy to get the Fed chairman to resign is having an effect and we have seen the curve steepen more," said Tom di Galoma, managing director of rates and trading, at Mischler Financial, in Park City, Utah. "There is something going on. They seem to want to make a move on the Fed earlier, rather than later."

In a steeper curve, the yields on longer-dated Treasuries are higher than those on short-term maturities. Investors are compensated with a higher yield for taking risk over a longer time frame.

A selloff in bonds could occur, especially on the long end, if investors perceive risks to Fed independence or anticipate persistent inflation with tariff-induced price pressures, analysts said.

U.S. 10-year yields were also slightly higher on the day, up at 4.427%, after hitting a four-week high of 4.441% earlier in the session.

That steepened the yield curve, with the spread between two-year and 10-year yields touching 54.2 bps, its widest in about two weeks. The curve was last at 52.7 bps, slightly steeper from levels late on Friday.

Investors overall are wary of putting new positions ahead of the release of the U.S. consumer prices index (CPI) report on Tuesday. CPI is expected to show an uptick for June as sellers began raising prices to cover tariffs already imposed by the Trump administration.

A Reuters poll showed core or underlying CPI rising 0.3% last month from a tame 0.1% in May. On a year-on-year basis, core CPI is expected to have gained 3% from 2.8% in the previous month. (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Matt Tracy in Washington; Editing by Nick Zieminski and Cynthia Osterman)