Federal Reserve Chairman Jerome Powell spoke, breaking the silence giving indication to which direction rate may go. Treasury Bonds, USD and Gold were on the move yesterday. Continue reading to get the full daily market analysis.
30-Year Treasury Bonds Surprised Us as Others Dropped
The market yesterday remained stable until Federal Reserve Chairman Jerome Powell began his speech at the International Monetary Fund forum.
Shortly before, an auction of 30-year American Treasury Bonds startled the market by increasing nearly 10 bps due to a lack of demand for real money. Bond yields rose across the curve, producing strength in the dollar and selling in the stock market.
The correction in this movement was later reversed; however, Treasuries plunged, and stocks fell after Jerome Powell dismissed Wall Street's dovish stance. He mentioned that Fed officials are not entirely convinced they have tightened interest rates enough to achieve inflation targets.
Interest Rate Hikes Might Be in Play Still
In the past week, the market anticipated a halt to interest rate hikes following weaker job market data and lower-than-expected services PMI figures. This led to increased bond purchases and significant declines in yields. The 10-year bond, in particular, experienced a drop of over 50 basis points during this period, with discussions emerging about potential interest rate cuts next year once inflation turns moderate and the economy weakens.
However, Powell's recent comments suggest a different perspective. He indicates that the Fed intends to maintain high-interest rates for as long as necessary. Importantly, the Fed does not perceive the 2% inflation target as being within close reach.
As a result, bond yields shot up with the 10-year bond around 12 bps higher and in the stock market the optimism that had prevailed in the last two weeks is beginning to fade. The three main North American indices experienced daily drops of more than 0.50% for the first time this month.
The USD Gained Momentum Up as Gold Took a Slight Turn
The US Dollar has stopped its fall, strengthening against all its peers and gold, with an inverse correlation with the dollar, fell from the day's highs of $1965 per ounce, a technical resistance level.
Gold hourly chart November 11th, 2023. Source: CAPEX.com WebTrader.
- 30-year treasury bonds surprised traders as it got a boost of nearly 10 basis points.
- Jerome Powell stated that the Fed intends to maintain high-interest rates for as long as necessary – while others are hopeful for rate cuts early next year.
- The 10-year bond rose by 12bps after Powell’s comments.
- USD strengthens as its inverse, Gold, takes a small dip.