US bond yields are rising, and the market is concerned about the delay in the Fed's interest rate cut

Zhitong Finance ·  Jan 16 15:30

Source: Zhitong Finance

US Treasury yields rose across the maturity curve during Tuesday's Asian trading session. This change is similar to the previous trend in the European bond market, which occurred after ECB policymakers made hawkish remarks, so investors are worried that the Federal Reserve may be unwilling to cut interest rates in March.

According to information, since inflation fell from its peak in mid-2022, the market has been concerned that the Federal Reserve may switch to cutting interest rates. Investors are waiting for Federal Reserve Governor Christopher Waller's speech scheduled to be delivered on Tuesday. Previously, Federal Reserve Chairman Jerome Powell made it clear in December last year that a series of measures to cut interest rates would be introduced in 2024.

In response, Prashant Newnaha, senior Asia Pacific interest rate strategist at TD Securities Singapore, said, “Federal Reserve and ECB officials have always tried to curb market expectations of aggressive interest rate cuts. The market ignored their remarks for quite some time, but it appears that the market paid some attention to the ECB's comments.”

ECB Governing Council member Robert Holzmann said in an interview that continued inflation and geopolitical risks will prevent the ECB from cutting interest rates this year.

In terms of exchange rates, rising US Treasury yields boosted the dollar's performance against other currencies. As of press time, the Bloomberg Dollar Spot Index is up 0.3% to 1230.94. If it surpasses the January 5 high of 1231.44, the index will reach its highest point since mid-December.

Stonex Financial Pte. Singaporean currency trader Mingze Wu said that the rise in the US dollar was due to an increase in US yields. “The market may finally recover from a hangover and clearly realise that Powell may not cut interest rates at all this year.”


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