Treasury yields spiked upwards yesterday soon after Fed Chair Powell said that “a December cut wasn’t a foregone conclusion – in fact, far from it”.
That one single line was enough to trigger a hawkish repricing in interest rate expectations. The December cut probability fell from almost 100% to 70% now. That’s still high in my opinion, as it should be at least 50% as Powell also added that in
case they don’t get the data due to the shutdown, they might as well skip the December cut.
On the daily chart above, we can see the 10 year Treasury yield. Right now, we are just erasing the drop triggered by Trump’s escalation two weeks ago. That escalation is what triggered a dovish repricing, so it’s just common sense that we go back to previous levels. Technically, a move into 4.20% should be in the cards.
If the government shutdown continues, next week we just get the ISM PMIs and the weekly ADP jobs update in terms of economic data, but the focus will also be on Fed speakers.
This article was written by Giuseppe Dellamotta at investinglive.com.