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Analysis: Fed patience calms yields for now, but market feels like ‘coiled spring’

Sumary of Analysis: Fed patience calms yields for now, but market feels like ‘coiled spring’:

  • NEW YORK (Reuters) – The Federal Reserve may have avoided inflaming the bond market with its latest policy decision and outlook, but as economic growth rebounds and inflation rises, at least temporarily, there are questions of how long yields will remain contained…
  • REUTERS/Kevin Lamarque/File Photo That a key issue for both investors and Fed officials who would rather not have to ride out another bout of bond market volatility as a growing body of indicators suggests U.S…
  • The yield curve steepened to its highest since September 2015 on Wednesday – with shorter-dated rates falling faster than the long end – indicating investors took the Fed at its word that interest rates would remain anchored even as the COVID-19 crisis winds down…
  • But while the Fed actions may be keeping the yield increases relatively orderly, for now, a surge higher remains a risk…
  • Fears of sooner-than-expected rate hikes, or tapering of the Fed asset purchases, in recent weeks have helped to send yields on longer-dated Treasury yields to the highest in a year…
  • The benchmark 10-year Treasury yield rose to a high of 1.689% prior to the Fed statement following the close of its policy meeting on Wednesday, its highest since January 2020….

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