Bonds: Timing of next Fed rate hike increasingly unclear, some analysts say

Yields on key US treasury notes firmed on Monday evening even as Federal Reserve chair Janet Yellen and other top US central bank officials appeared to kill off any possibility of an interest rate increase at the upcoming 15 June FOMC.

Speaking in Philadelphia, Yellen said gradual interest rate hikes were likely on the way Stateside, adding that "positive economic forces have outweighed the negative" for the US.

Nevertheless, Yellen conceded that May's weak non-farm payrolls report bore "close watching".

"If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives," Yellen said in remarks prepared for her speech.

Commenting on that speech, Michael Gapen, at Barclays, said: "The lack of specificity on timing keeps the door open for a July rate increase should external risks subside and domestic data show meaningful improvement, but a later move beyond September is also possible if labor markets and inflation data disappoint relative to committee expectations."

Financial markets were assigning a probability of 26.7% to the chance of an interest rate hike by the Fed at the 27 July FOMC.

Before Yellen spoke, comments from three other Fed officials on Monday appeared to have a dovish hue, which was notable given the shock US non-farm payrolls data out last Friday, and set against some perceived-to-be hawkish murmurings from officials over the past week or so.

Federal Reserve Bank of St Louis president James Bullard said he was leaning against endorsing a rate rise at the central bank's meeting on 15 June. "I'd rather move on the back of good news about the economy," he told The Wall St Journal.

Meanwhile, Federal Reserve bank of Atlanta president Dennis Lockhart said he would wait to see how the data came in over the next few weeks.

Federal Reserve bank of Boston president Eric Rosengren noted choppy economic data.

He added that it was "my expectation that economic conditions will continue to gradually improve, which in turn would justify further actions to normalize policy, continuing a gradual return to a more normal interest rate environment."

Acting as a backdrop, according to data from the Bundesbank the average rate across the country´s outstanding bonds dropped below zero for the first time ever, declining to -0.02%.