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

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

  • Breadcrumb Trail Links PMN Business Mar 18, 2021 • 28 minutes ago • 3 minute read • Join the conversation Article content NEW YORK — 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…
  • 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…
  • That meant the spread between the two- and 10-year rates – the most common measure of the yield curve – widened to 153.2 basis points…
  • While long-term rates are likely to continue their march upward in line with better economic projections and rising Treasury supply, it could be more gradual than had been feared…
  • The 2013 taper tantrum saw bond yields rise dramatically after then-Fed Chair Ben Bernanke told lawmakers the Fed could take a step down in its pace of purchases of assets that had been propping up markets….

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