The Daily Update: A Change of Tune / Virus Relief Bill

Yesterday Federal Reserve Governor Lael Brainard broke the deafening silence from the Fed since the turn of the year with regards to rising treasury yields. Brainard became the first Fed speaker (in public at least) to acknowledge that the recent price action might be cause for concern. Although she did not say there was any reason for alarm, she did acknowledge that last week’s moves, and the speed with which they occurred, had ‘caught her eye’. She went on to say that her concern level might rise if she sees more ‘disorderly conditions’ or that if there was a ‘persistent tightening in financial conditions that could slow progress to our goals’. This is an (albeit small) step away from the recent Fed views that market moves were solely representative of an improvement in the outlook.

Brainard also said she thinks the U.S. economy will take ‘some time’ to recover enough for the central bank to begin scaling back its bond purchases. ‘The economy remains far from our goals in terms of both employment and inflation, and it will take some time to achieve substantial further progress’ Brainard said in a speech. ‘We will need to be patient to achieve the outcomes set out in our guidance.’ She added the Fed has said it will need to see ‘substantial further progress’ toward its full employment and price stability goals before tapering QE.

It was also reported that Chuck Schumer, the Senate Majority Leader, voiced confidence yesterday that Biden's USD1.9tn coronavirus relief bill will pass in the Senate this week, stating the Senate will take up the legislation as early as today. The Senate is using the budget reconciliation process to pass the bill, which limits time for debate and allows legislation to pass with a simple majority. ‘We want to get the biggest, strongest, boldest bill that can pass. That's what we are working to do’ Schumer said, adding ‘We'll have the votes we need to pass the bill’.