Summary:
Treasury yields surged to multi-year highs as Fed maintains 'higher for longer' rates and gov't increases bond sales to tackle deficits.
Treasury yields climbed to new multi-year highs as Fed sticks to its ‘higher for longer’ interest rate stance and the federal government boost the size of bond sales to grapple with mounting deficits.
The rent selloff was mostly concentrated on long-end bonds, indicating that the Fed’s balance sheet unwinding outweighs concerns about stubbornly high inflation.
That bodes ill for other asset classes. Gold slipped as the US dollar gains for a fourth day, touching a new high for the year on Monday.
Fed officials warned on Friday of further rate hikes even after voting to hold the benchmark rate steady last week, with three policymakers saying they remain uncertain about whether the inflation battle is over.
Holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, fell to their lowest level since January 2022, reflecting weak investor confidence. With gold looking relatively expensive, it might struggle to attract meaningful flows even in a US slowdown.
‘In the current environment gold is not a very convincing diversification asset.,’ said Marco Piersimoni, co-manager of Pictet Multi Asset Global Opportunities fund, who has halved his allocation to the precious metal in the past 12 months.
Gold was rejected by 1929 before testing its recent low, showing slightly bearish bias. A break below 1913 exposes the key support level of 2000.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
Trump tariffs may spike yuan volatility, China surplus hits record, euro near parity. Chinese stocks are downgraded but offer record dividends.
2025-02-05
US private payrolls slowed in December, but a strong labor market suggests the Fed will delay rate cuts, according to ADP.
2025-02-05
The yen hit a seven-week high on Wednesday as delays to tariffs on Canada and Mexico eased concerns about the Fed's ability to cut interest rates.
2025-02-05
