Bond Markets Prepare for Fed Liftoff

October 18, 2021

Bond Markets Prepare for Fed Liftoff Photo

Special Guest Appearance by Mark Heppenstall This Week

Since the onset of the COVID-19 pandemic, the Federal Reserve (Fed) and central bankers across the globe have consistently stressed the need for patience when it comes to removing monetary policy accommodation. Bond investors are increasingly questioning this commitment to patience as the troubling increase in inflation this year has yet to show signs of letting up.

The recent pick-up in sovereign bond yields, especially at the front end of the yield curve, is gathering momentum. Two-year Treasury rates have more than doubled in the last month, with investors pricing in a faster timeline for Fed liftoff from the zero level. Communication during the upcoming November Federal Open Market Committee meeting is taking on added significance for financial markets as Fed Chair Powell confronts more persistent inflation pressures.

Tags: Federal Reserve | FOMC | Bond markets | Monetary policy | Inflation | Interest Rates

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