Yellen to advocate action vrs upturn in inflation? - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that the more likely scenario for Yellen’s testimony this week is that she emphasises that large fiscal stimulus would mean a more active FOMC to counter the upturn in inflation and that the FOMC will not take risks in allowing inflation to overshoot in any meaningful way.

Key Quotes:

"That might well be a catalyst for 10-year yields to stabilise and for the direction in rates to turn from bear-steepening to bear-flattening as a more active FOMC in 2017 is priced into the market. The changing composition of the Board of Governors under Trump also points to the need for the short-end of the US rates curve to adjust further higher, helping to reinforce US dollar buying momentum."