Treasury Yields Top 1.75% After Powell Spurs Bets on Inflation (Mortgage Rates And MBS Duration Rising, Philly Fed Survey Prices Highest Since 1979)

by confoundedinterest17

The Federal Reserve seems calm about rising prices, such as the Philadelphia Fed Business Survey showing faster rising prices since 1979.

(Bloomberg) — Treasury yields breached more key levels as bond traders boosted bets that the Federal Reserve will allow inflation to overshoot as the U.S. economy recovers.

Yields on the benchmark 10-year note climbed as much as 11 basis points to 1.75% — the highest since January 2020, while the 30-year breached 2.5% for the first time since August 2019. Market measures of inflation expectations are now trading near multi-year highs, with traders paring back bets the Fed would start tightening as soon as late next year. The dollar rebounded against its major peers.

The moves came after Fed Chair Jerome Powell indicated he wasn’t concerned over the recent surge in long-term yields — with his focus still on whether financial conditions remained accommodative. Rates have surged this year on expectations that stimulus spending and vaccine rollouts will fuel a sharper economic recovery and a pick up in inflation.

And the US Treasury curve rose on The Fed’s assurance of support..

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While Powell isn’t concerned over the rise in long-term rates, I am concerned about residential mortgage rates rising.

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Modified duration for MBS is rising to its highest level since May 2019.

Let’s see how the Biden/Pelosi/Schumer $1.9 trillion Covid-relief impacts inflation. Which is already hitting the Philly Fed Business Outlook PRICE PAID index. Highest since 1979 and Jimmy Carter.

And the promise of unlimited money printing and payouts led the Philly Fed Business Outlook to be the highest EVER.

The Philadelphia Fed business outlook is also the highest … ever?

I am surprised it took politicians this long to figure this out.

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