Can you feel it? The fear of a taper tantrum is in the air. Long-term yields are steepening and the annual testimony of Federal Reserve Chairman Jay Powell on monetary policy next week may be contributing to why markets were on edge. A sell-off in US bonds likely contributed to choppy markets this week.

Fed Minutes from the last policy meeting were released this week and showed some lively debate amongst governors but the headline is the same; the Fed is very serious about letting inflation move above 2% to achieve maximum employment and its board members are confirming that they will view initial reflationary forces as acceptable and likely not the beginning of a significant trend. This is important since markets appeared to be partially down this week on rising rates and the fear of a ‘taper tantrum’. Powell continues to beat the steady drum of assuaging investors and that’s unlikely to change anytime soon.

The weather events in Texas this week prompted rumblings amongst the board’s more progressive leaning members of the risks to the financial system posed by climate change. We noted this would be a major battle line between parties this year, and the current cold weather appears to have heated the argument up. On Thursday, Federal Reserve governor Lael Brained ...

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