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We got a glimpse of how the UK intends to deal with COVID debt:

Rishi Sunak, the Chancellor of the Exchequer, announced Wednesday that Britain’s corporate tax rate will rise to 25 per cent from 19 per cent in April, 2023. It’s the first time the rate has been increased since 1974 and comes after successive Conservative governments have lowered it from 28 per cent over the past decade. The government also plans to freeze several personal tax allowances for four years starting in 2022.

Powell made cautious remarks:

Jerome H. Powell, the chair of the Federal Reserve, said he and his colleagues have a “high standard” for what full employment means, underscoring that the central bank is likely to be patient in removing its support for the economy.

Mr. Powell pointed out that the virus has pushed many people out of the job market and said that “4 percent would be a nice unemployment rate to get to, but it will take more than that to get to maximum employment.” It is unlikely the job market will return to full speed this year, he added, speaking in an online question-and-answer session hosted by The Wall Street Journal.

In fact, Mr. Powell’s entire message on Thursday centered on how cautious the central bank plans to be in dialing back economic policies — low interest rates and large-scale bond buying — that are meant to help the economy recover from the painful coronavirus shock.

… and equities got hammered:

Wall Street ended sharply lower on Thursday, leaving the Nasdaq down around 10% from its February record high, after remarks from Federal Reserve Chair Jerome Powell disappointed investors worried about rising longer-term U.S. bond yields.

Canada’s TSX also closed down, but escaped the worst of the U.S. selloff with the help of a rally in crude oil prices.

The benchmark 10-year Treasury yield spiked to 1.533% after Powell’s comments, which did not point to changes in the Fed’s asset purchases to tackle the recent jump in yields. It still held below last week’s one-year high of 1.614%. But the yield on Canada’s 10-year government note reached just over 1.5% – its highest since before the COVID-related economic shutdowns of early 2020. Canada’s five-year bond yield, closely followed because of its influence on fixed-mortgage rates, stayed well below the highs of last week.

This entry was posted on Thursday, March 4th, 2021 at 9:26 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.