U.S. government bond yields increased across the curve. Congress passed a two year budget deal that will raise government spending following the passing of the $1.5 trillion tax cut.
Fears of inflation pressures picked up with strong wage growth reported and unemployment remaining low. Investors have linked increased inflation fears as one of the triggers causing the market sell off earlier in the month.
A more hawkish tone from the Fed’s new leader, Jerome Powell, is causing some forecasters to now expect four rate hikes in 2018 compared to three previously assumed. Stimulative fiscal policy continues to lead Fed officials to report that the economic outlook remains strong. Further rate hikes could cause additional market volatility as the Fed works to deter the economy from overheating. A 25 basis point rate increase is expected in March.