Taperless tantrum in a teacup?
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As we closed out February last week, the so-called taperless tantrum sent stocks tumbling and emerging market currencies weaker as the US Treasury yield briefly snuck above 1.6% on worries that inflation is just around the corner.
Its worth casting our minds back to 2013, when the Fed was in the third round of its Large-Scale Asset Purchase program, more commonly known as QE3. In congressional testimony that May, Fed Chair Bernanke hinted that the pace of monthly asset purchases would be reduced (“tapered”) at some point. Bond yields snapped higher. The stock market sold off a month later when Bernanke signaled that tapering would happen by the end of the year.
Fast Forward to Feb 2021, and in his monetary policy testimony, Fed Chair Powell indicated that the Fed has no intention of altering the monthly pace of asset purchases (currently $120 billion per month). The Fed’s focus is on the job market and Powell said that the Fed is still a long way from achieving its inflation and employment goals. Other Fed officials echoed this view.
But the market seems to think otherwise, the bond market that it is.
Chris Holdsworth, chief investment strategist at Investec Wealth and Investment spoke to Michael Avery about why the market is worried about inflation.
Its worth casting our minds back to 2013, when the Fed was in the third round of its Large-Scale Asset Purchase program, more commonly known as QE3. In congressional testimony that May, Fed Chair Bernanke hinted that the pace of monthly asset purchases would be reduced (“tapered”) at some point. Bond yields snapped higher. The stock market sold off a month later when Bernanke signaled that tapering would happen by the end of the year.
Fast Forward to Feb 2021, and in his monetary policy testimony, Fed Chair Powell indicated that the Fed has no intention of altering the monthly pace of asset purchases (currently $120 billion per month). The Fed’s focus is on the job market and Powell said that the Fed is still a long way from achieving its inflation and employment goals. Other Fed officials echoed this view.
But the market seems to think otherwise, the bond market that it is.
Chris Holdsworth, chief investment strategist at Investec Wealth and Investment spoke to Michael Avery about why the market is worried about inflation.