March 2, 2021
Yesterday’s rally in US equities was attributed to a stabilization in bond yields largely due to rhetorical intervention from the ECB, BOJ and RBA. The RBA also took action by stepping up bond purchases. To date, the Fed has appeared far-more composed (in public) about the yield back up than its global peers. Bond yields have been rising since the Georgia Senate run-offs concluded on January 6. Increased fiscal spending expectations are the clear reason with 10-year yields rising from 0.95% on January 5 to 1.37% on February 24. Powell gave his semi-annual Congressional testimony last Tuesday (2/23) and Wednesday (2/24). His steady/composed attitude about the yield back up to date resulted in a yield spike from 1.37% to an intraday high of 1.60% the following day. The sequence of events has resulted in increased interest in Powell’s WSJ Q&A appearance this Thursday. Members of Congress tend to ask questions that sometimes miss the mark. Questions this Thursday will be more focused on market concerns. Friday’s release of the February Jobs Report should also have near-term implications for bond yields.