Source: Federal Reserve

Rising bond yields and accompanying inflation fears are adding a level of drama to Federal Reserve Chairman Jerome Powell’s appearance this week before Congress. The central bank chair is slated to address Senate and House panels on successive days as part of mandated semiannual updates on monetary policy.

Normally routine affairs, recent financial market tumult and concerns about how the Fed may react have investors paying a bit more close attention than usual to the hearings scheduled for Tuesday and Wednesday.   “This is one of the more interesting episodes in which a Fed chair has had to testify,” said Nathan Sheets, chief economist at PGIM Fixed Income. “Sometimes we say, ‘ho hum, no news.’ This is going to be news. He’s really caught between a rock and a hard place.”

What’s got the market’s attention recently has been a pickup in government bond yields, particularly further out on the curve. While the 2-year is unchanged for 2021, the 5-year has risen nearly a quarter percentage point as of Friday’s market close while the benchmark 10-year note has seen its yield jump 41 basis points to 1.34%, an area where it hasn’t been since around the same time in 2020, before the worst of the pandemic struck.

(CNBC – Continue Reading)

London – Unemployment in the UK rose to its highest level in almost five years as the government furlough scheme continues to hide the true state of the jobs market. The Office for National Statistics said that Since February of last year, the number of payroll employees has fallen by 726,000. The unemployment rate rose a tenth to 5.1% in the three-months to December, in line with expectations. The ONS said this was 1.3 percentage points higher than a year earlier and 0.4 percentage points higher than the previous quarter. Experts predict job losses could peak at 7.5% when the government's furlough scheme comes to an end.

The report said single-month and weekly estimates of the unemployment rate suggested that the rate was largely flat through the October to December period.  Jobless claims change fell by 20,000 after gains of 7,000 previously.

In the three-months to December, the employment change fell by 114,000, far beyond the drop of 30,000 forecast and the fall of 88,000 reported for November. Over the same period, redundancies slowed to 343,000 from a record high of 395,000 compared to last month.

(LiveSquawk - Continue Reading)

Source: RBNZ Media

LONDON - The New Zealand Central Bank is expected to leave its monetary policy settings unchanged this week, although the recent improvement in the economic outlook has convinced many that the easing cycle has ended, and tighter policy is on the horizon. In a recent Reuters poll, all 12 economists said they see the official cash rate (OCR) on hold at 0.25% at Wednesday’s meeting and the parameters of the large-scale asset purchase (LSAP) programme unchanged - the RBNZ has committed to buy up to NZD 100bln of government bonds by June 2022.

Economists also unanimously agreed that rates would remain on hold for the remainder of the year, but some are predicting the first hike will occur in 2022 if the economy continues on its current trajectory and that asset purchases could be curtailed early.  Capital Economics Australia and New Zealand economist, Ben Udy, argued that further gains in inflation and continued tightening in the labour market will prompt the RBNZ to end asset purchases “altogether by the middle of this year.”

“And we suspect a further rise in inflation and the continued tightening in the labour market will prompt the Bank to reduce stimulus further. The strength in recent economic data has brought markets around to our view that interest rates will be hiked in 2022,” said Udy.

(LiveSquawk – Continue Reading)