Daily Market Color

Powell/Yellen Testimony Calms Bond Markets

Rates trade sideways as Powell and Yellen testimony continues before Congress
Rates traded in a tight range following an unexpected dip in durable goods orders and Congressional testimony from Treasury Secretary Janet Yellen and Fed Chair Jerome Powell. The 10-year UST yield fell 1 bp to 1.60% while swap rates were little changed across the curve.  Major US equity indices continued to decline – the S&P 500 and DJIA closed 0.6% and 0.01% lower, respectively.
Powell continues to dispel runaway inflation concerns
Powell and Yellen concluded their two-day joint testimony after speaking before the Senate Banking Committee earlier today.  Their comments were consistent from yesterday and addressed topics like continued economic support and inflation.  Yellen spoke in support of the $1.9 trillion stimulus bill, but added, “longer-run, we do have to raise revenue to support permanent spending that we want to do.”  Powell addressed Senator’s concerns regarding rapid inflation, commenting that the market’s response to growth “has been an orderly process. I would be concerned if it were not an orderly process, or if conditions were to tighten to a point where they might threaten our recovery.”
Durable goods orders decreased 1.1% in February, well below expectations
Orders unexpectedly fell for the first time in nine months after harsh weather conditions disrupted supply chains.  Last month’s deep freeze negatively impacted manufacturing in Texas and other Southern states.  Core capital-goods orders, which include nondefense capital goods, declined 0.8% from the previous month to $72.5 billion.
IHS Markit’s PMI composite flash falls to 59.1 in March
While a reading above 50 indicates growth, the index fell slightly from February’s 59.5 level, which was the highest reading since mid-2014.  The services index rose to 60 from 59.8, indicating continued growth following economic reopening.  The manufacturing index rose from 58.6 to 59 after supply shortages limited growth and pulled factory production growth to a five-month low.

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