Federal Reserve Chairwoman Janet Yellen is likely to face a tougher audience today as she returns to Capitol Hill for a second day of monetary policy testimony, this time before the House Financial Services Committee.
Yesterday the market focused on Yellen's comments before the Senate Banking Committee that the Fed would likely raise short-term interest rates “at our upcoming meetings” amid an improving economy, a signal that a move could come as soon as the central bank’s next meeting in March...which sent the March rate hike odds soaring.
Yellen declined to say whether a rate increase next month was likely but cautioned that holding off on rate increases for too long “would be unwise,” and could force the Fed eventually to raise rates rapidly, which could trigger a recession.
While Senators yesterday focused primarily on economic and regulatory issues, House members today are likely to question Yellen about many GOP-backed proposals to rein in the central bank, proposals that she has previously opposed. The measures include allowing Congress to audit the Fed’s interest-rate decisions and requiring it to adopt a mathematical rule to guide interest rate decisions.
* * *
Here were some of the key market movements that we pointed out yesterday as Yellen testified that "waiting too long to hike is unwise." A full summary of Yellen's first day of testimony can be viewed here.
March rate-hike expectations have risen to their historical highs... (around 36%)
Longer-term Treasury yields took another leg higher as Yellen talked about the Fed's balance sheet.
Bank stocks are leading post-Yellen with bonds and bullion lower... The broad stock indices are unchanged...
Utes, Tech, and Energy are weighing on indices, only banks are higher...
Treasury yields are now higher across the entire curve year-to-date...
Full Prepared Remarks below (link here):