Powell Retires Use of ‘Transitory’ to Describe Inflation, Denting Market Rally

Testimony by Federal Reserve Chair Jerome Powell on Tuesday struck a hawkish chord in the U.S. Treasury market, pushing up shorter-term yields, which had fallen earlier in the session as part of an across-the-curve rally sparked by concerns over the Omicron coronavirus variant.

Powell told a U.S. Senate committee the term "transitory" to characterize inflation should probably be retired. He also said the Fed should consider accelerating the tapering of its bond purchases at its upcoming December meeting.

The benchmark 10-year note yield, which fell to its lowest level since Sept. 24 at 1.412%, was last down 8.5 basis points at 1.4443%. The 30-year yield, which dropped to its lowest level since late January at 1.776%, was last 8.5 basis points lower at 1.7951%. Yields move inversely to prices.

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The shorter end of the curve reversed course and rose with the two-year yield, which reflects short-term interest rate expectations, last up 5.1 basis points at 0.5611%. A closely watched part of the curve that measures the gap between yields on two- and 10-year Treasury notes flattened, with the spread falling to as low as 87.80 basis points.

"Powell came off as much more hawkish than many were assuming given the variant risk," said Ben Jeffery, an interest rate strategist at BMO Capital Markets in New York, adding that

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Source: NewsMax


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