Powell put a lid on Treasury yields
What happens when you have a market with a double-bottom on the downside and a double-top on the upside?
We're about to find out.
US 10-year yields continued lower today, falling 0.34 basis points to 1.278%. Bonds have backed away from a test of 1.4% after Powell and are now looking for a floor.
If I had to characterize what's going on, I would say this reflects a market that hasn't quite moved on from delta, isn't sure what's coming on inflation and not sure how a Nov/Dec taper will be digested. Add in some brewing growth worries because of persistent bottlenecks.
BMO isn't expecting a move out of the range any time soon:
We'd like to assume the array of data inputs over the coming days will be instrumental in defining the macro outlook, but in the wake of Jackson Hole it's far more likely that US rates are in for a renewed round of datapathy as opposed to a collective rethink of the direction of the real economy. The overarching themes remain in place: 1) solid jobs growth is anticipated for the balance of 2021, 2) tapering will be announced and executed by the New Year, and 3) inflation will be scrutinized for signs that the Fed's transitory characterization might have missed the mark. Needless to say, none of these issues will be resolved in the near-term. Hence our ongoing anticipation for the range to hold at least until the September 22 FOMC meeting.
