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The Federal Reserve chair will discuss the outlook for policy and the economy in Congressional testimony on Wednesday and Thursday. Investors will focus on her views regarding interest rate policy and when the central bank plans to start winding back its $4.5tn balance sheet.While the Fed forecasts a further tightening of 100 basis points by the end of 2018, the bond market pegs that at around 45bp.Investors anticipate a slower pace of bond sales in the coming months after countries loaded up on debt while market conditions were good early in the year. Yet while there will be less debt to sell, lower demand than anticipated in a French bond auction last week suggests a shift in market dynamics, with sovereign securities beginning to look less attractive in a rising-rate environment.The real yield -– which is the nominal yield minus inflation – of the bond is currently minus 1.4 per cent, up from minus 2 per cent last August.Banca Carige is seen by many in the markets as the next focal point for Italy's troubled banking sector, following the controversial bailout of two regional banks in June.Last month, Carige transferred €938m of gross bad loans to a securitisation vehicle.
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