Bond Report: Treasury yields rise as investors return from 3-day U.S. holiday weekend

The Federal Reserve last week hiked its benchmark interest rate by 75 basis points, or three-quarters of a percentage point, its largest such move since 1994, while Chair Jerome Powell said a 75 or 50 basis point move could occur in July. Other major central banks, with the exception of the Bank of Japan, have also moved or prepared to tighten monetary policy in response to surging inflation pressures.

Powell will testify before Congress on Wednesday and Thursday this week as he provides lawmakers with semi-annual updates on monetary policy.

Fears that monetary tightening will cause a recession have mounted as central banks have grown more aggressive, contributing to sharp losses for equities last week. U.S. stocks were bouncing on Tuesday, however, with futures pointing to a higher start for U.S. equities.

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What analysts are saying

“Nothing much has changed since last week surrounding expectations about central bank tightening or signs that inflationary pressures may be moderating,” said Raffi Boyadjian, lead investment analyst at XM, in a note. Recession is still the foremost concern for investors, so this week’s rebound in equity markets looks more like a technical correction following the heavy selling over the course of the previous two weeks.”