The market is getting nervous about Powell’s testimony this week
Rising bond yields and accompanying inflation fears are adding a level of drama to Federal Reserve Chairman Jerome Powell’s appearance this week before Congress.
The central bank chair is slated to address Senate and House panels on successive days as part of mandated semiannual updates on monetary policy.
Normally routine affairs, recent financial market tumult and concerns about how the Fed may react have investors paying a bit more close attention than usual to the hearings Tuesday and Wednesday.
“This is one of the more interesting episodes in which a Fed chair has had to testify,” said Nathan Sheets, chief economist at PGIM Fixed Income. “Sometimes we say, ‘ho hum, no news.’ This is going to be news. He’s really caught between a rock and a hard place.”
What’s got the market’s attention recently has been a pickup in government bond yields, particularly further out on the curve.
While the 2-year is unchanged for 2021, the 5-year has risen nearly a quarter percentage point as of Friday’s market close while the benchmark 10-year note has seen its yield jump 41 basis points to 1.34%, an area where it hasn’t been since around the same time in 2020, before the worst of the pandemic struck.