A useful take on Federal Reserve Chair Powell’s remarks Thursday. Powell spoke at the New York economic club:
Powell … may have unintentionally egged on traders to keep pushing yields, according to Evercore ISI in a note (this via Dow Jones / Market Watch).
- Asked about the sharp rise in long-term Treasury yields … Powell said the rise didn’t appear to be fueled by expectations for higher inflation or further Fed rate hikes. “It’s really happening in term premiums, which is the compensation for holding long-term securities, and not principally a function of the market looking at near term fund rates,”
- That’s the sort of rise that tightens financial conditions, which Powell acknowledged could potentially substitute for further Fed hikes “at the margin,” noted Krishna Guha, head of the global policy and central-bank strategy team at Evercore ISI
- Powell’s comments “lacked any urgency to lean against the rise in yields,”
- “We do not think Powell intends to green light a further yield move higher, but we worry the bullish growth/hands off tone on yields may mean this is how his remarks are interpreted”
Indeed, its already evident:
One for the UST and stock traders, maybe the only green they’ve seen today.