Yields extend pullback from yearly high amid mixed concerns ahead of Fed’s Powell

• US 10-year Treasury yields drop, 2-year coupons stay sidelined around multi-day top.
• S&P 500 Futures, Asia-Pacific shares trade mixed amid concerns over US inflation, Fed rate hike.
• Powell’s remarks show readiness for tighter monetary policy as economics stay positive.
• Merck’s update on Molnupiravir Mechanism adds to the list of risk catalysts as covid cases rally.

Market sentiment remains sluggish during early Tuesday as traders await Fedspeak, as well as the US inflation data. Additionally, record covid cases and an update on the cure of the virus also challenge the traders during a quiet session.

Amid these plays, the US 10-year Treasury yields dropped 2.5 basis points (bps) to 1.757% after rallying to January 2020 levels during the previous day, before closing in negative on D1. Further, the 2-year bond coupons remain steady around March 2020 levels, near 0.90% at the latest. Additionally, S&P 500 Futures print drop 0.07% intraday while stocks in the Asia-Pacific region trade mixed by the press time.

Reuters’ tally suggests a new record top of the US daily infections above 1.13 million. However, comments from Merck’s official saying, “Expect Molnupiravir mechanism to work against omicron, any covid variant,” could be cited as positive for the risk appetite.

Also, the mixed reaction to the US Federal Reserve (Fed) Chairman Jerome Powell tests the traders of late. The hawkish comments from Fed Chair Jerome Powell, per the prepared remarks for today’s Testimony, could be considered as a major favor to the risk-on mood. The Fed Boss said, “The economy is growing at its fastest rate in years, and the labor market is robust.” However, his pledge to stop higher inflation from getting entrenched keeps the rate hike concerns on the table and weighs on the sentiment.

It’s worth observing that the escalating inflation fears and indecision over the covid stance trouble market players ahead of the key data/events. Among them, today’s testimony by the Fed Chair Powell and Wednesday’s inflation becomes the key.

Read: Forex Today: US inflation takes center stage this week