- US Treasury yields pause after two-day rally to refresh monthly high, stock futures grind higher.
- Fed’s Bullard teases monetary policy tightening but Daly turns it down.
- Yellen pushes back the debt ceiling expiry, Biden-Xi talks fall short of excitement.
- Fedspeak becomes important amid a light calendar, inflation is the key.
Market sentiment dwindles early Wednesday as Fed policymakers try to placate bond bears. However, firmer US data and chatters that the incoming stimulus will propel inflation keep bond bears hopeful.
That said, the US 10-year Treasury yields pause around 1.63% after the recent run-up to renew the highest levels since October 26. The lack of movement could also be witnessed in the US stock futures as the S&P 500 Futures seesaw around 4,700 after rising to a new one-week high the previous day.
An eight-month high US Retail Sales for October, 1.7% MoM versus 1.4% expected enables Fed policymakers like St. Louis Fed President James Bullard, as well as ex-US Treasury Secretary Lawrence Summers and former New York Fed President Bill Dudley, to back the Fed rate hike concerns. Also favoring the hawkish hopes, weighing on the bonds, were upbeat outcomes of the US Industrial Production and housing market data.
It should be, however, noted that San Francisco Federal Reserve Bank President Mary Daly recently said, “Rate hikes would not fix high inflation now, would curb demand and slow recovery.” The policymaker adds that today’s inflation in mid-2022 is “a different conversation.”
Also challenging the mood and underpinning the US Treasury yields, as well as the US Dollar Index (DXY), is the lack of major positive updates from a virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. US President Biden signaled that they have a lot to follow up on despite having a “good meeting” with China’s Xi.
Though, US Treasury Secretary Janet Yellen offered some relief to the markets by announcing a bit more time before the debt ceiling expires, from December 03 to 15, due to US President Biden’s latest stimulus.
Given the sluggish markets and a light calendar, today’s Fedspeak and chatters concerning China will be important for fresh impulse.