Treasury yields drop by most in a week after Fed’s September meeting minutes

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Two-, 10- and 30-year Treasury yields fell by the most in a week on Wednesday after the release of the minutes of the Federal Reserve’s September meeting that prompted policymakers about the path to future rate hikes. Provided a little new insight into thinking.

What is happening
what is driving the market
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Data released on Wednesday showed US wholesale prices rose for the first time in three months. Wholesale prices climbed 0.4% in September, indicating little progress in the Federal Reserve’s fight to overcome high inflation. Economists polled by the Wall Street Journal had expected a 0.2% gain.

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Minutes of the Fed’s September meeting, released on Wednesday, offered little in the way of new information for financial markets. It showed that Fed officials were concerned about ongoing and “unacceptably high” inflation, and saw little evidence of inflation falling “significantly”.

Furthermore, many participants of the rate-setting Federal Open Market Committee considered the risk of “too much action” on inflation to be less expensive than “too little action” and indicated that they would potentially keep rates higher when unless they look “compelling”. “Evidence of a fall in the price advantage.

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Bond and equity investors alike are eagerly seeking proof that inflation is peaking, and therefore eager to parse the US consumer-price index released on Thursday. Economists estimate the annual headline CPI inflation rate to fall from 8.3% to 8.1% over the past 12 months.

What stock market investors will see in Thursday’s inflation report?

Meanwhile, markets are pricing in an 81% chance that the Fed will raise interest rates by 75 basis points to between 3.75% and 4% in early November. According to the CME Fedwatch tool, the central bank is still expected to move its fed-funds rate target to between 4.5% and 4.75% or even higher by next March.

Overseas, the UK government-bond market continued to experience concern over sales.

UK bond yields near 14-year high after the Bank of England closes support at the end of the week

what analysts are saying

“The market is currently priced at 75 basis point Fed rate hikes in November and 50 basis points in December,” said Tim Magnusson, chief investment officer at Minnesota-based hedge fund Garda Capital Partners. “I think the market price is currently correct, and I see us peaking at the fed-funds rate of 4.5% or 4.75% by next spring, but only if inflation TIP comes down as predicted by the market. If If that doesn’t happen, rates will need to go up still more.”

Ahead of Thursday’s CPI report, the market is also currently pricing at 8.1% year-on-year inflation rate for September and 0.4% or 0.5% in monthly core readings, he said via phone. “That’s probably correct from our analysis. We’ll be down from August’s core reading of 0.6%, but the market doesn’t know for sure. We’ll have to see where rents and services equal to owners come from.”

“What the market is really going to pay attention to tomorrow.

Credit: /

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