SINGAPORE/MIAMI- Bond markets steadied, the US dollar fell and stocks edged ahead on Wednesday after central banks from Washington to Wellington vowed to keep monetary policy loose for a long time, giving investors enough confidence to seek out riskier assets.
US Federal Reserve Chair Jerome Powell told Congress on Tuesday the economy remained “a long way” from employment and inflation goals and that rates would stay low and bond buying proceed apace until there was “substantial further progress”.
The Reserve Bank of New Zealand on Wednesday made no changes to its rates or bond purchase program either and said policy will need to remain stimulatory until inflation is sustained at 2 percent and employment hits maximum levels.
Taken together, it was enough to reassure investors that authorities won’t rush to raise rates even if inflation accelerates.
Risk-sensitive currencies rose, pushing the kiwi, Aussie and sterling to their highest levels since early 2018, while the safe-haven Japanese yen slipped.
MSCI’s broadest index of Asia-Pacific shares outside Japan, which has drifted 1.2 percent lower over the week as rising yields pressured valuations, rose 0.3 percent and S&P 500 futures rose 0.1 percent.
Tech stock selling pushed Japan’s Nikkei 0.4 percent lower. .T
Benchmark 10-year US Treasury yields, which fall when prices rise, were steady at 1.3480 percent after closing 2.4 basis points lower following Powell’s testimony to Congress.
Powell did not seem too fussed about the selloff that has driven the 10-year yield up by 40 basis points this year, telling lawmakers it was a statement on the market’s confidence in the pandemic recovery. – Reuters