The push for a new stimulus deal picks up steam this week, with the Biden administration and Congress targeting mid-March for its approval. Given the amount of the proposed stimulus and the economy’s current performance, the bond market will be listening very closely to Federal Reserve (Fed) Chair Jerome Powell’s testimony to Congress this week.
U.S. Treasury yields at the long end of the yield curve continue to make new highs since the start of the pandemic. The expectation is for a significant pickup in growth during the second and third quarters of this year. The big debate among market participants has been whether the economy will run too hot and create inflation, or inflationary pressures will be offset by other economic forces.
I will be listening for any insights from the Fed on the increase in yields and the potential for Fed policy to engage in any yield curve control.
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