Cramer says bond traders spiking yields yet again won’t win their battle against Fed’s Powell

Published Thu, Mar 18 202112:11 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

CNBC's Jim Cramer expects Federal Reserve Chairman Jerome Powell 's inflation outlook to be more accurate than the bond traders who are betting on a sustained increase and pushing Treasury yields higher. Cramer's comments on "Squawk on the Street" came after the yield on the 10-year Treasury jumped to 1.75%, a level not seen since January 2020 , continuing a bond sell-off that's rattled equity investors this year. Yields move inversely to prices. The action in bonds is being driven by concerns that more Covid stimulus on top of an already recovering economy will spark worrisome inflation. The 10-year yield started the year at less than 1%. "It's happening very fast, and I think this is the bond market saying, 'You don't know what you're doing, Jay Powell,'" Cramer said. "Well, let me tell you something Mr. Bond Market, you're going to be dead wrong." After its two-day March policy meeting, the Fed on Wednesday left policy interest rates near-zero and kept its asset purchase program unchanged, both among the extraordinary measures in place to help support the economy during the fallout from the pandemic With Covid cases falling, vaccinations rising and more businesses reopening, the Fed also increased its growth and inflation projections. But central bankers also indicated that rates will likely remain steady through 2023. Powell acknowledged that inflation is likely to pick up this year as the economy recovers, but he contended that higher prices will be temporary. Some economists worry about growth overheating as pent-up demand from the pandemic is unleashed as immunity protection from vaccinations and high levels of prior infection are leading to a resumption of activity. Add to that the recently approved $1.9 trillion Covid relief bill, championed by President Joe Biden and Democrats, and many bond traders feel that the environment is ripe for problematic inflation. Cramer said he largely agrees with Powell, not the bond market. "I've been going over all the commodities that Powell talked about when he's saying, 'Listen, it's going to be transitory.' He's going to be right about every single one of them with the possible exception of copper because of EV batteries because they require so much copper," the "Mad Money" host said. Powell, who became the top U.S. central banker in early 2018 under former President Donald Trump , appears to be learning lessons from the actions of his predecessor Janet Yellen , Cramer said. Yellen now serves as Treasury secretary in the Biden administration. In 2015, the Fed hiked rates for the first time since 2006, taking its target funds rate to 0.25% to 0.5% from 0% to 0.25%, which just so happens to be the current level. The move then came as the economy was digging out of the 2008 financial crisis and the Great Recession . "[Powell] doesn't want to be hoodwinked like Yellen was in 2015, when she saw commodity prices going up and misinterpreted that as strength in the economy," Cramer said, pointing to Thursday's higher-than-expected initial jobless claims data as evidence that, despite relaxed Covid mitigation measures, damage remains in the labor market. "Those jobless claims today are going to verify what Powell is doing." Cramer said. "This is about a guy who doesn't want to make the same mistake they made in [2015 and 2016]. He doesn't want to let the commodity market bully him into doing something that could be short term and wrong." Responding to those who say the bond market is currently making its own decision on inflation, irrespective of Powell, Cramer said: "I am saying, he's not going to let the short rates go higher. The mortgage rates are still OK." The average rate on a 30-year fixed mortgage hit its last low of 2.75% at the end of January, but it's since climbed pretty steadily along with bond yields, according to Mortgage News Daily . After a sizeable move overnight, it now stands at 3.45%. The rate is the same now as it was a year ago. Ultimately, Cramer said, some of the factors causing a rise in commodity prices , and as a result bond yields, are out of Powell's control such as Saudi Arabia's decision earlier this month to extend its voluntary oil production cut . Winter storms also have played a role in disrupting certain commodities, Cramer added. "I think when you get commodity inflation that's more dependent on weather and the Saudis, [Powell] can't do anything about the Saudis" or the weather, Cramer said.

Scott Mlyn | CNBC

Cramer's comments on "Squawk on the Street" came after the yield on the 10-year Treasury jumped to 1.75%, a level not seen since January 2020, continuing a bond sell-off that's rattled equity investors this year. Yields move inversely to prices. The action in bonds is being driven by concerns that more Covid stimulus on top of an already recovering economy will spark worrisome inflation. The 10-year yield started the year at less than 1%.

"It's happening very fast, and I think this is the bond market saying, 'You don't know what you're doing, Jay Powell,'" Cramer said. "Well, let me tell you something Mr. Bond Market, you're going to be dead wrong."