If there was any doubt as to the market-moving potential of today's Congressional testimony from Janet Yellen, it was quickly cleared up this morning. Well before she began her question and answer session, the mere release of her prepared remarks nearly 2 hours earlier sent bond markets into weaker territory.
The downward slide paused into 10am as she read the prepared remarks, almost as if bond markets were waiting to see if she would say something to "save" the recent rally momentum. That sense of "let down" is also in line with the reaction to prepared remarks. In other words, Yellen had a chance to pay more serious attention to the past two Jobs reports, but instead gave a very much "business as usual" outlook on tapering and Fed policy in general.
There is an understandable gripe with this movement in that one might argue: she's saying nothing new yet bonds are selling! Unfortunately, that's exactly the problem. Yellen is a known 'dove' in that she errs on the side of more accommodative policy. So there was a chance for her to indeed say "something new" by way of expressing more concern about recent economic data. Instead she said she strongly supports the current policy path, thus deflating the hopes of market participants hoping for more bearishness.
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