Wall Street Today | Fed's Logan Says Treasury Yields Rise Might Keep Rates Down

The Federal Reserve Bank of Dallas President Lorie Logan said the surge in Treasury yields might keep interest rates down from increasing.

"I tend to think monetary lags are shorter than others; the bulk of the economy is adjusting more quickly to monetary policy; looking at financial markets and the performance of the economy, the long-term neutral rate may be higher," Fed Gov Logan said.

U.S. stocks traded higher Monday afternoon, shaking off early losses that followed the weekend attack by Hamas on Israel, as investors focused on remarks by Federal Reserve officials. Stocks extended early afternoon gains after Fed Vice Chair Philip Jefferson said that a sharp rise in long-term yields meant the Fed would need to keep rates higher for longer.

"Looking ahead, I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future policy path," Jefferson said.

More than 1,100 people have died since the fighting between Israel and militant group Hamas broke out over the weekend, in a conflict that has potential repercussions across the wider region. US crude futures surged above $86 a barrel, at one point rallying 5.4%.

While Israel’s role in global oil supply is limited, the bloody outbreak threatens to embroil the US and Iran. Iran has become a major source of extra crude this year, alleviating otherwise tightening markets, but additional American sanctions on Tehran could constrain those shipments.

“Recently, crude has been prone to overreact to geopolitical events, and price increases have been short-lived,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “This situation may prove to be the exception,” with the market especially sensitive to potential supply disruptions.