US Treasury yields higher on Powell’s second day of testimony
On Capitol Hill, Fed Chair Powell began addressing the House Committee on Financial Services at 10 a.m. ET. Speaking on Tuesday, Powell said it is “beyond consideration” for the U.S. not to repay all of its debt. The remarks come at a time when Congress battles with a higher level of spending.
“While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals,” Powell said in his prepared remarks to the Senate Committee on Banking, Housing and Urban Affairs. “Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year.”
In October, Powell said the central bank was “a long way” from a neutral overnight lending rate, and in December commented that the process of reducing the balance sheet was on “autopilot.” Those comments appeared to spook the markets throughout the final month of 2018 until the Fed chair and others soften their stance and suggested a more data-dependent path forward.
“Powell didn’t really shed any light on the balance sheet, which is the big area of focus for the marketplace,” Seaport’s di Galoma added. “I’d say that he’s given somewhat of dovish testimony in terms of being patient and watching the economy, but he could turn the green light on again [on rate hikes].”
Investors are also paying close attention to an upcoming meeting between the leaders of North Korea and the U.S.