Is Federal Reserve Chairwoman Janet Yellen capable of conducting a bond-market bloodbath? That’s what some on Wall Street are wondering.
Albert Edwards, market strategist at Société Générale and noted permabear, expects Yellen, who is set to deliver semiannual testimony to the Senate Banking Committee on Tuesday, will trigger a steep bond selloff by talking up the possibility that the central bank will raise interest rates in March.
In a note, he refers to the possibility as “The St. Valentine’s Day Massacre,” a homage to the 1929 gangland murder of seven men in a garage in the Lincoln Park neighborhood on Chicago’s North Side. The killings were allegedly planned by famed mobster Al Capone, who was trying to wrest power away from Chicago’s Irish gangsters.
Edwards isn’t the only one who expects Yellen to remind investors that the central bank could raise interest rates at its next meeting for what would be the third time in a decade.
“The market is bracing for the possibility that Yellen will talk up the chances of a rate increase in March,” said Guy LeBas, chief fixed income strategist at Janney.
Treasury yields, which move inversely to prices, are on track to rise for the third straight day, a selloff that has largely been driven by these concerns, LeBas said. The yield on the 10-year Treasury note TMUBMUSD10Y, +1.68% rose 3.6 basis points to 2.447%.
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