Yields started jumping right at this moment with Powell

Bond yields rose to the highs of the day as Federal Reserve Chair Jerome Powell laid out a case where the Fed could raise rates more than it has forecast.

“At the December meeting the median participant called for three rate increases in 2018,” Powell said Tuesday in response to a question during his testimony to the House Financial Services Committee. “Since then, what we’ve seen is incoming data that suggests a strengthening in the economy and continuing strength in the labor market. We’ve seen some data that in my case will add some confidence to my view that inflation is moving up to target. We’ve also seen continued strength around the globe. And we’ve seen fiscal policy become more stimulative.”

But he emphasized this does not mean the forecast will be upgraded. “So I think each of us is going to be taking the developments since the December meeting into account and writing down our new rate paths as we go into the March meeting, and I wouldn’t want to prejudge that,” he said.

Treasury yields rose after Powell’s comment just around 10:43 a.m. ET. Yields move opposite price. The 10-year jumped to 2.91 percent. The 2-year yield, the most reflective of Fed policy, briefly rose above 2.27 percent but was back to 2.26 percent.

“The market started reacting to the suggestion that the path [of rate hikes] could be shifting higher, based on all the positives mentioned by Powell,” said George Goncalves, head of fixed income strategy at Nomura.

The Fed’s inflation forecast is presented in a chart that has been termed, the “dot plot,” with each Fed official’s target for a different period in time. The median for this year is currently showing three interest rate hikes, and the fed funds futures market is also reflecting the potential for three rate hikes.