US treasury yields surged again while stocks tumbled overnight after Fed Chair Jerome Powell failed to provide any guidance on what Fed would do regarding recent sharp rise in long-term yields. That left markets wondering how far Fed would allow the yield curve to continue to steepen.
Powell noted that the climb in yield was “something that was notable and caught my attention”. He would be “concerned by disorderly conditions in markets or a persistent tightening in financial conditions that threatens the achievement of our goals”. Yet, Fed is looking at “a broad range of financial conditions,” rather than a single measure.
There were some speculations that Powell would hint on the possibility of an “Operation Twist” that concentrate on purchases on the longer-end. When asked about the topic, Powell just said “our current policy stance is appropriate”.
US 10-year yield rose 0.0080 to 1.550 overnight, but it’s held below last week’s high of 1.614 so far. Upside momentum in TNX remain rather firm from medium term point of view. Any “disorderly” movement could shoot TNX to 2% level rather quickly, which is close to 1.971 structural resistance and 61.8% retracement of 3.248 to 0.398 at 2.159.
