By Alessandro Albano
Investing.com – Americans are back in the market after the strong jump seen late last week, indicating that inflation expectations are starting to spill over into bond markets, following excerpts from Fed Chairman J. Powell will hold today in the Senate.
Il is in the area of 1.54% and returns to the levels of last June, with an increase of 3.7% on a daily basis, after having broken the 1.4% in the session last Friday (highs since July).
In the upper part of the curve, the 30-year has crossed the 2% threshold (highest yield since the beginning of July), marking a rise of 3% today, while among the shorter maturities the three-year debt ensures a return by 0.575% (+3.95). At the moment there are no reversals of the between the different deadlines.
The market has begun to price, not only the recent spikes in consumer prices and the PCE index, but also inflation expectations one year from now, which in August rose (for the tenth consecutive month) to 5, 2% according to data from the New York Fed. Expectations over the three years, on the other hand, increased by 0.3%, hitting the maximum moves of 4%, while over the 5 years, inflation expectations on a daily frequency increased to 2.21% (Fred data).
“I think the big story that hasn’t been talked about last week is the movement of yields, which has been pretty even across the markets.” economist Mohammed El-Erian told CNBC, adding that the bond market “is starting to smell something that the stock market has not yet realized, otherwise we would have seen different movements”.
Powell in the Senate
The testimony of Fed Chairman J. Powell (Senate Banking Commission at 16:00 CEST) could give a further boost to bond rates and after the new central bank indications communicated last week, with tapering and rate hikes that could become reality sooner than expected.
According to excerpts from the speech, Powell will tell US senators that inflation “is high and will probably remain so in the coming months, before moderating the pace.”
“With the economy continuing to reopen and spending rebounding, we are seeing upward pressure on prices, caused in particular by supply bottlenecks in some sectors. These effects are proving to be more sustained and lasting than anticipated, but they will subside and, in so doing, inflation will fall back towards our long-term target of 2%, “Powell is likely to say.
The Fed, the governor will say, will do “everything possible to support the economy for as long as it takes for the recovery to be complete”. Following today’s speech, number one from the Marriner S. Eccles Building will speak to the House Financial Services Committee on Wednesday.
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