Yields in the US rise because there is doubt about a scenario of rate cuts

Por Herbert Lash

NUEVAYORKJan 13 – Yields on US Treasury bonds rose on Friday after falling the day before on a decline in consumer prices in December, as some investors doubted market players’ view that the Federal Reserve will have to cut interest rates this year.

* The first fall of the IPC since May 2020, a 0.1% decline that is likely to put pressure on the Fed to slow the pace of interest rate hikes, pushed Treasury prices higher and pushed debt back to 10 years to a low of 3.424% on Thursday. Yields move inversely to price.

* The University of Michigan Consumer Survey revealed on Friday that the one-year inflation outlook eased to a preliminary reading of 4.0% in January, from 4.4% last month, reinforcing the sentiment. that inflation has peaked and will slow down considerably.

* The yield on the 10-year bond rose 4.7 basis points to 3.494% on Friday, after falling to 3.418% in early European trading, in a sign that some market players appear to be questioning the Fed’s insistence on that rates will stay high for longer.

* According to Benoit Anne, Chief Strategist at Investment Solutions Group at MFS Investment Management in London, the moment the Fed stops raising interest rates will be a major milestone for the market and a change that will dramatically improve risk appetite.

* However, the market is pricing in extremely aggressive rate cuts, when in reality rates will stay high for some time, he said.

* “There are still a couple of hikes on the horizon and I see a long period where the Fed won’t budge,” Anne said.

* A vision shared by Johan Grahn, Head of Strategy at ETF at AllianzIM in Minneapolis: “The market isn’t hearing what’s coming from the Fed yet. The market is already pricing in rate cuts later this year, and that’s not at all what the Fed is trying to get the market to see ”.

* The two-year return, which generally moves in step with interest rate expectations, rose 7.9 basis points to 4.217%.

* News that JPMorgan Chase & Co said it booked $1.4bn in anticipation of a mild recession rocked markets, with a recession harbinger: the gap between two-year and 10-year yields widened to -72.5 points basic.

* The yield on the 30-year Treasury note rose 3.7 basis points to 3.611%.

* Meanwhile, the equilibrium rate of the securities protected against inflation (TIPS) to five years was located at 2.269% and the equilibrium rate of the TIPS at 10 years it was 2.214%, which indicates that the market expects an average inflation of 2.2% per year over the next decade.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.