Treasuries and Libor Futures Rise on Inflation Expectations

The 10 year Treasury hit a pandemic era high of 1.41% yesterday before settling today 1.38%. Fed Chair Powell’s congresional testimony yesterday and today assured the market that highly accomadative policy will contine. Any changes will be gradual and telegraphed well in advance. He made it clear that the Fed’s main concern is unemployment and not rising prices. The current Fed policy regarding monthly asset purchases and zero rates will not be affected until full employment (defined as a 4% unemployment rate) is achieved. The Fed is willing to tolerate inflation above 2% for a whille in order to acomplish their employment goals. As of now, despite warning signs the Fed’s preferred inflation idicator, the PCE (Personal Consumption Expenditures) has yet to hit 2%. The PCE release next week will be closely watched. Stay tuned.