U.S. Fed Chair Jerome Powell's wait-and-see approach in a much-anticipated address on Friday gave investors and market participants some reassurance that the central bank's extraordinary efforts to prop up the economy were likely to support riskier assets a while longer.
Investors had been focused on a potentially imminent decision by the central bank to begin reducing its $120 billion in monthly purchases of U.S. Treasuries and mortgage-backed securities. Powell said he agreed with the majority of his colleagues that a bond "taper" could be appropriate "this year."
"So barring some big surprises, I think you'll still continue to see stocks perform, high-yield bonds, investment grade credits - they may all be highly priced and priced for perfection, but I don't think we're getting a signal from the Fed that they're about to pull back enough to change the trend," she said.
U.S. Treasury prices, particularly in the 5-7 year part of the curve, rallied, which Bank of America analysts said was the market reading Powell's comments "as suggesting there will be ongoing challenges for the Fed to meet their rate hike thresholds."
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