US futures weak in the aftermath of the record close of the Dow Jones and the turnaround of the Nasdaq, which discounted the rise in US yields by dropping 1.3%. At 12:38 PM Italian time, Dow Jones futures are flat around 36,667 points; futures on the S&P 500 fell by 0.10% to 4,779. Nasdaq futures underperformed the market with a drop of 0.40% to 16.211 points.
Maximum attention to the trend of US Treasuries: ten-year yields jumped to 1.71% yesterday, after ending 2021 at 1.51%.
The US interest rate boom is explained by investors’ bets of a more hawkish Fed. On the other hand, from the same dot plot published in the last meeting of the FOMC – the monetary policy arm of the American central bank led by Jerome Powell -, it emerged that the Fed expects on average at least three rate hikes in the course of 2022, for respond to runaway inflation in the United States.
Michael Schumacher, head of Wells Fargo’s rate strategy, highlighted the record jump in Treasuries rates, noting that the 10-year yield hike in the first session of 2022, or January 3, was the highest of the year. first trading day of the new year since 2001.
In 2001, rates rose in the first session of the year by 24 basis points, while the increase the day before yesterday caused the 10-year rate to soar from 1.51% last Friday to over 1.64%, according to TradeWeb data.
Yields then rose to 1.71% on the eve, while today they retrace to 1.666%.
However, Schumacher does not believe that 10-year rates will rise above the 2.25% threshold, at least this year, even if, of course, it will be US inflation that will determine the market trend.
Greater clarity will come to the market with the publication, scheduled for today, of the minutes of the Fed relating to the last meeting in December.
On that occasion, in the face of fed funds rates that were left unchanged in the range between zero and 0.25%, the Fed announced a strong acceleration of tapering, a sort of turbo tapering.
And the dot-plot showed precisely that, out of a total of 18 FOMC exponents, 12 estimate at least three rate hikes in 2022.
Interviewed by Cnbc Ian Lyngen, head of BMO’s US rate strategy division, commented on the boom in Treasury rates, stating that “optimism about the economy amid inflation concerns will bring 10-year rates to 2%. during the first quarter, and from there the economy and the Federal Reserve will determine how high they go further. ”
For Lyngen of BMO, the trend in Treasury yields “will depend on the data and tones coming from the Fed”. However, “we’re not going to hit 3% (for 10-year Treasury rates). I think we’ll hit the high at the start of the year.”
The focus of the operators is also on oil prices, following the OPEC + decision, which confirmed analysts’ expectations, deciding not to make changes to the strategy launched last August, which provides for a gradual increase in supply by 400,000. barrels per day. Oil prices, which jumped by more than 50% in 2021 reflecting investor confidence in the bullish effects of the reopening of the post-Covid economy, are today little moved, slightly negative.
It affects the publication of data from the API (American Petroleum Institute) which, yesterday reported that, in the week ending December 31, gasoline stocks rose by 7.1 million barrels in the United States, compared with a 4.4 million barrel jump in distillate stocks (which include heating fuel).
On the forex market, the euro strengthens against the dollar around the $ 1.1315 mark. The pound also advanced against the dollar, at $ 1.3534, but lost against the euro, with the EUR-GBP exchange rate + 0.25% to GBP 0.8359.
With Omicron fears easing, the yen plunged to a five-year low against the US dollar yesterday at JPY 116.35, after piercing the 115.50 support.
The Japanese currency fluctuates against the dollar around JPY 116.15.
The yen also lost against the euro to drop to a two-month low of JPY 131.45, below its 200-day moving average.
The currency also tested a six-year low against the Swiss franc and a seven-week low against the Australian dollar.