Saturday, 17 Apr 2021

With bond yields jumping, investors will closely watch what the Fed says about its buying plans.

Key bond yields jumped on Wednesday, rising ahead of the Federal Reserve’s March rate decision and a news conference where Jerome H. Powell, the central bank’s chair, will discuss the economic outlook.

Investors will intently watch the Fed chair’s reaction to the move, which pushed the rate on 10-year government notes up to 1.69 percent around midday. It had hovered around 1 percent at the start of the year.

Market-based interest rates have been moving up throughout 2021, driven by an improving economic outlook, expectations for slightly higher inflation and a growing anticipation that the Fed might dial back its mass bond purchases — which push longer-term rates lower — and lift its short-term policy interest rate sooner than previously expected.

The Fed has been buying $120 billion in Treasury and mortgage-backed bonds each month in a bid to stoke growth and keep markets calm. Officials have said they will continue that pace until they see “substantial” progress, without clearly defining what that means.

Some investors have begun to expect the Fed to taper off that buying sooner than they had been forecasting as government spending and increasing vaccinations improve the economic outlook. Others think that the increase in longer-term bond yields could prompt the Fed to revamp its program in the near term.

Higher market-based rates could make mortgages more expensive and corporate investments less attractive, working against the Fed’s goals. The central bank could shift the composition of its purchases or even buy more to keep interest rates historically low.

Mr. Powell has pushed back on the idea that a taper is imminent, and has promised that the Fed will alert investors well before the slowdown starts. But he has also pointed out that rates are moving up because of a brightening outlook.

“I would be concerned by disorderly conditions in markets or a persistent tightening in financial conditions that threatens the achievement of our goals,” Mr. Powell said at an event this month, while stressing that the Fed looks at a range of financial conditions.

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