U.S. Treasury yields fell on Wednesday after comments from Federal Reserve Chair Jerome Powell stoked concerns about economic growth and inflation pressures.
Powell said U.S. economic growth appears to be slowing, with consumer spending growing modestly and a rush of imports to avoid tariffs likely to weigh on estimates of gross domestic product and sentiment.
In addition, Powell said the tariffs announced by U.S. President Donald Trump were larger than even the highest estimates prepared by the Federal Reserve ahead of time.
U.S. stocks extended losses as Powell spoke, spurring a move into safe-haven Treasuries.
"(Powell's) basically saying tariffs could pose a challenge between controlling inflation and boosting growth. It looks like first-quarter growth is slowing down, consumer spending is moderating," said Peter Cardillo, chief market economist at Spartan Capital Securities, New York.
"Powell's saying what the market has been fearing all along. And it's coming from the Fed chief, confirming all these things."
The benchmark U.S. 10-year Treasury note yield fell 4.2 basis points to 4.281% after hitting 4.273%, its lowest since April 10.
Earlier in the session, yields were little changed after the Commerce Department reported that retail sales surged 1.4% last month, pointing to a relatively healthy consumer side, which accounts for about two-thirds of U.S. economic activity.
"The threat of higher prices accelerated purchases, so even with a tariff pause we will likely see a drop-off in retail sales as people have already stocked up," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
The 30-year bond yield fell 2.8 basis points to 4.748%.
Trump's 25% global car and truck tariffs came into effect in early April, with industry analysts and manufacturers warning that they would significantly raise motor vehicle prices. Car makers reported a big jump in auto sales in March. Some attributed that to a rush by buyers to beat the tariffs.
News showing a bigger-than-expected 0.3% fall in industrial production last month prompted little movement.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 4.2 basis points to 3.786%.
A $13 billion auction of 20-year bonds was seen as solid by analysts, with demand at 2.63 times the bonds on sale.
A closely watched part of the U.S. Treasury yield curve measuring the gap between two- and 10-year Treasury notes , seen as an indicator of economic expectations, was at a positive 48.9 basis points.
The U.S. Treasury yield curve measuring the gap between two- and 10-year Treasury notes, closely watched as an indicator of growth expectations, was at a positive 52.0 basis points, steepened from +49.3 late Tuesday.
The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.316% after closing at 2.353% on April 15.
The 10-year TIPS breakeven rate was last at 2.173%, indicating the market sees inflation averaging about 2.2% a year for the next decade.