Fed Chair Jerome Powell’s speech he gave this week at the 60th Annual Meeting of the National Association for Business Economics (NABE) in Boston in which he suggested that U.S. interest rates could possibly rise to a level where they could restrict growth has caused a lot of turbulence in financial markets.

Powell’s speech suggested that the terminable rates of the Fed funds this cycle may be perhaps higher than markets had previously assumed. That has been said before but perhaps not in quiet a so high-profile manner.

Anyway, Powell’s speech has caused a bond selloff that sent benchmark U.S. Treasury yields to their highest levels since 2011 that then spread into Asia, Europe and emerging markets.

The U.S. 10-year Treasury yield traded above 3.2 percent while the 30-year Treasury yields were pushed above the 3.25 percent, which ‘could’ mean to be a “game changer” for the fixed-income as well as the equity markets in developed as well as emerging markets.

What could be important for investors is that the “chart levels” may support the bearish view on U.S. Treasuries (lower prices mean higher yields), after yields broke out of their 30-year downtrend, which set off “technical alarm bells” for a whole range of investors, private as well as professionals.

The increase in what’s effectively the world’s benchmark risk-free rate also challenges appetite for other assets, and futures on the S&P 500 Index duly dropped alongside the Stoxx Europe 600 and MSCI Asia Pacific gauges.

Emerging-market shares as well as EM bonds were hit particularly hard. The MSCI Emerging Market Index sank 2.1 percent to its lowest level in more than three weeks on the biggest tumble in eight months.

The higher Treasury yields supported also the dollar and the Bloomberg Dollar Spot Index rose to about 96, which is close to its highest level of the year, and which is by the way not good news for emerging markets (EM).

China’s markets were closed for the “National Day Holiday” week, but in offshore trading the Chinese yuan slid past 6.9 per dollar which is about its weakest level against the dollar for the year.

Italy’s Pandora Box of the Budget Deficit

Meanwhile, the Italians have become creative with the official accountantcy. The government’s budget deficit projection has been revised down twice in the last 24 hours. The unreliable deficit projection expressed as a percentage of an unreliable GDP projection is now an unreliable deficit projection expressed as a “lower” percentage of an unreliable GDP projection.

So, Italy and the European Union (EU) have resumed their sniping as the populist government in Rome is still preparing to flesh out its revised fiscal plans.

Antonio Tajani, president of the European Parliament, said he doesn’t think Italy’s “revised” deficit goal will be sufficient because the growth rate is too low and the initial forecast of 1.6 percent growth “is just propaganda.”

It’s obvious that “those who are supposed to lend us money to finance the public debt don’t like” the plan, said Tajani.

By the way, Tajani is a co-founder of Silvio Berlusconi’s center-right Forza Italia.

Italian 10-year bond yields are still trading at close to their highest yields of the year, which is at about 3.37 percent.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.