TREASURIES-US long-dated yields hit multi-week peaks as market mulls Fed's Powell's fate

By Gertrude Chavez-Dreyfuss

NEW YORK, July 14 (Reuters) - U.S. long-dated Treasuries were under pressures 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.

But lately, 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.

U.S. Treasury 30-year yields climbed to five-week peaks just shy of 5% US30YT=RR, and was last up 2.5 basis points at 4.983%. The earlier rise in U.S. 30-year yields mirrored movements in their counterparts in Germany and Japan.

Germany's 30-year yield rose as high as 3.254% on Monday, its highest since October 2023, taking its cue from the Japan's bond market.

The yield on the 20-year Japanese government bond surged to its highest since 2000, and 30-year yields neared an all-time high hit on May 21, as concerns grew that an upcoming election there could pave the way for increased fiscal spending.

"The market's just getting overly tired of all this talk of tariffs. It just seems to be getting more and more delayed," said Tom di Galoma, managing director of rates and trading, at Mischler Financial, in Park City, Utah.

In the meantime, he said bond market participants seem to be thinking more about Powell going forward.

"The strategy to get the Fed chairman to resign is having an effect and we have seen the curve steepen more," di Galoma said. "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.

U.S. 10-year yields were also higher on the day, up 1.4 bps at 4.437% US10YT=RR, 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 53.7 bps US2US10=TWEB.

Investors overall are wary of putting new positions ahead of the release of the U.S. consumer prices index (CPI) 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.