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Homefixed incomeWhy the Fed is 'delighted' with bond markets: Analysts

Why the Fed is ‘delighted’ with bond markets: Analysts

U.S. government bond markets have stayed relatively benign in recent weeks, proving that fears of taper-induced volatility were unfounded and analysts told CNBC the Federal Reserve should be pleased with the recent moves.

All eyes are on Fed chair Janet Yellen's first testimony before Congress on Tuesday, as investors attempt to predict whether the well-known dovish economist will continue tapering at $10 billion a month or pause following a string of weaker-than-expected data.

(Read More: Markets wait on Fed Chair Janet Yellen)

Simon Warner, head of fixed income at AMP Capital, told CNBC Asia's Squawk Box on Monday the recent behavior of the U.S. government bond market will give Yellen an extra spring in her step.

"The lack of inflationary pressure is keeping a lid on the long end of the bond market along with some of these concerns we have around the world. So I would have thought the Fed would be delighted about the way the bond market has traded since their move in December," he said.

(Read more: Good time to buy bonds? 'Absolutely not')

Janet Yellen smiles after taking the oath of office as Chairman of the Board of Governors of the Federal Reserve System February 3, 2014 at the Eccles Building in Washington, DC.Mandel Ngan | AFP | Getty Images

Yields on 10-year U.S. Treasurys rose 138 basis points between May and late December, following the Fed's first mention of tapering through to the central bank's first stimulus reduction of $10 billion a month. The rapid nature of the spike prompted worries that the economic recovery could be derailed as long term U.S. government bond yields – which determines mortgage rates – rose too quickly.

Ten-year Treasury yields have since settled back down to 2.67 percent, despite the announcement of a further $10 billion reduction in January.

Warner said it was now clear that all the hype about a rapid spike in bond yields was overblown.

(Read more: Markets fear US chilled by more than weather)

"The one thing that hasn't really been talked about in the last six weeks or so is how benign the bond market has been," he said. "All this talk about how rates were going to spike higher, and [how] emerging market concerns were due to higher rates in the long end, is clearly garbage. There's no pressure in the long end of the curve at all."

Viral Bhuta, portfolio manager, fixed income at UTI International Singapore, said the fact that bond markets have settled down demonstrates that investors are more relaxed about the tapering schedule.

"Uncertainty around the tapering schedule will reduce as the Fed continues to communicate with investors, allowing volatility in the bond market to cool off," he said.

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