Wall St week ahead: Bond investors look for Fed to justify steepening yield curve

Traders wear masks as they work on the floor of the New York Stock Exchange as the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York, U.S., May 28, 2020. REUTERS/Lucas Jackson

Investors will get a chance next week to see whether the U.S. Federal Reserve agrees with their optimism. The U.S. central bank is expected to hold a two-day meeting that will conclude Wednesday, the first since a meeting in April in which Fed Chair Jerome Powell said that the U.S. economy could feel the weight of the economic shutdown for more than a year.

While the Fed could introduce additional bond-buying programs known as quantitative easing or yield-curve control measures to target short-term rates, some fund managers say they expect that yields would need to rise significantly from here to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the worst part of the coronavirus crisis has passed.