PrefBlog

Bonds were front and centre today:

U.S. stocks closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years, as Treasury yields climbed after a disappointing auction of 30-year bonds and comments from Federal Reserve Chair Jerome Powell. But as it has every day this week, the Canadian stock market diverged in performance, with the S&P/TSX Composite Index ending with gains as commodity prices rebounded and investors cheered upbeat corporate earnings.

Powell said central bank officials “are not confident” interest rates are high enough to tame inflation, and may not get much more help from improvements in the supply of goods, services and labour.

U.S. stocks had moved slightly lower prior to Powell’s comments as yields climbed after a weak auction of US$24 billion in 30-year Treasuries with demand for the debt at 2.24 times the bonds on sale.

The benchmark 10-year Treasury note yield by late afternoon was up 12.8 basis points at 4.636%. The Canadian 10-year government bond yield, which takes much of its direction from its U.S. counterpart, was up an even steeper 18 basis points, to 3.890%. While a large one-day move, the yield is still below a 16-year high of 4.292% reached in early October.

… and Powell was talking tough:

U.S. Federal Reserve officials “are not confident” that interest rates are yet high enough to finish the battle with inflation, and may be nearing the end of how much help they can expect in lowering price pressures from improvements in the supply of goods, services and labour, Fed Chair Jerome Powell said on Thursday.

In comments more significant in flagging some of the Fed chair’s emerging views about structural economic changes following the pandemic, Powell said the Fed “is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 per cent over time; We are not confident that we have achieved such a stance.”

“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said in remarks prepared for delivery to an International Monetary Fund research conference, while adding that further policy moves would be conducted “carefully … allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening. We are making decisions meeting by meeting.”

The fight to restore price stability “has a long way to go,” the Fed chair said.

This entry was posted on Thursday, November 9th, 2023 at 7:45 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.