US 10-year yield: Here's how Fed Chair Powell's remarks propelled the rally

The US 10-year yield rose after Federal Reserve Chair Jerome Powell said that the rise in yields were “notable” but not "disorderly."

He also said that it would take “actual progress, not forecast progress” toward the Fed’s goals before they would slow the pace of asset purchases.

However, Powell’s comment on inflation was particularly interesting. He said that he thought it was unlikely that ‘deeply ingrained low inflation expectations would suddenly change’ in response to higher inflation in the near future.

Though Powell’s comment were dovish, they were not dovish enough. The signal to the market was clear - if markets expect stronger growth and higher inflation, Fed officials will not stand in the way of markets translating this to earlier Fed action.

It is now up to the market to flexibly price future Fed action – at least it has the go ahead from the Fed chief himself.