Daily Commentary BY THE CURVE TEAM –

Central Banks Counter Markets

24th of February, 2021

Market optimism is running up against defiant central banks.

The Federal Reserve Chairman in the US, Jerome Powell, reaffirmed the Fed’s position to maintain its accommodative policy. This is positive news for prices in risk assets but less certain for treasuries.

Recently treasury yields have been pushing higher off the back of vaccine distribution, an impending mammoth stimulus bill and rising inflation expectations. This is working counter to the Fed’s goals.

The Fed’s QE programme is aiming to keep interest rates low, so is limiting the rise in yields. Should the Fed or other central banks taper their QE programmes unexpectedly, then government bond yields could rocket up.

Domestically, yesterday the government announced a permanent increase to the JobSeeker payment of $50. Pre-covid the unemployment benefit was $560 a fortnight, bit since January has been $710.

This has gradually been wound back from the $1110 at the start of the pandemic. Significantly, the announcement was not accompanied by any plans for JobKeeper payments, which would indicate the government plan to stick by removing the payment.

Today construction work done and wage growth for Q4 are released.

Josh Stewart

Associate - Money Markets