WASHINGTON (DTN) -- At the beginning of a new trading week, crude and refined products futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved mixed as the U.S. dollar softened and yields on 10-year Treasury notes retreated from a 14-month high ahead of testimony by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen before Congress this week, with investors searching for additional clues on the direction of U.S. monetary policy.
Moves in the Treasury markets will likely be the focus this week after yields on 10-year Treasury notes jumped to a 14-month high 1.74% on Friday as investors weighed the prospects of post-pandemic recovery against fears over rising inflation. On Tuesday, Fed's Chief in his prepared remarks before the Commerce on Financial Services Committee will offer some guidance to jittery bond markets, likely reiterating the central's bank position that the slack in the U.S. labor market necessitates the ongoing quantitative easing. Last week, U.S. central bank pledged to keep interest rates near zero for the next two years and continue with its monthly $120 billion purchases program.
Fed's unprecedented measures, however, drew a fair share of criticism from the nation's top economists and policymakers, with former Treasury Secretary Larry Sommers calling out the current policy course as "the least responsible" in over forty years.
"The Federal Reserve has stuck to its guns on no rate hike for years and years and continuing to grow its balance sheet. What is kindling is now igniting. I am much more worried that we will have either inflation or a pretty dramatic fiscal-monetary collision," he said during a Bloomberg interview.
Sommers said there is "one-third chance" of significant U.S. inflation over the next few years compared with equal odds for rapid growth that will moderate in a noninflationary way.
The catalyst for rising inflation expectations is a dramatic pickup in the vaccination rate, with the country now administrating over 2.5 million doses a day, joined with a $1.9 trillion stimulus package enacted by the President Joe Biden along with some improvement in macroeconomic data.
Elsewhere the picture is less rosy. Germany, the Eurozone's largest economy, is mulling yet another extension to its four-month long lockdown after a slight easing in restrictions led to a 40% spike in new COVID-19 infections over the past two weeks. In France, nearly 20 million people were placed on lockdown orders last week followed by similar measures enacted in Italy and Poland. Renewed lockdowns, stringent mobility restrictions and a rather slow vaccine rollout in Europe have delayed the anticipated rebound in global oil demand until the second half of the year, said the International Energy Agency last week.
Later this week, investors will get a glimpse into eurozone's macroeconomic data, with preliminary readings on Purchasing Managers Index for March due out on Wednesday.
In early trading Monday, April West Texas Intermediate futures pared back overnight losses to hover near $61.43 per barrel (bbl) ahead of expiration Monday afternoon and next-month delivery May futures traded near parity with the expiring contract. The May international crude benchmark Brent contract on ICE slipped 10 cents to near $64.43 bbl. NYMEX April ULSD futures dropped 1 cent to near $1.8116 gallon and front-month RBOB contact fell 0.67 cent to trade near $1.9360 gallon.
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