Treasuries are at the cheapest levels against their Group of Seven peers in eight years. Here’s a line to use at work if you want to sound smart: “Are they cheap?” (Thoughtful pause.) “Or cheap for a reason?” Janet Yellen may provide the answers this week.
The Federal Reserve chair is scheduled to testify in the Senate on Tuesday and in the House the following day. Policy makers signaled at their Jan. 27-28 meeting that they’re willing to keep interest rates low for longer given risks to the economy. Since then, employment data for January showed gains in jobs and wages, boosting speculation the economy is strong enough to convince the Fed to raise borrowing costs in 2015.
“There’s a really strong recovery in the U.S.,” said Hiroki Shimazu, senior market economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank. “The hike in rates will start in the middle of this year. Inflation and the economic situation are very different from what’s happening in Europe and Japan.”
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