US Treasury’s Aggressive Buybacks Signal Investor Caution on Bonds
On Thursday, the US Treasury carried out a $785 million debt repurchase exercise for Treasury Inflation-Protected Securities (TIPS). On November 21, the operation was concluded. In the last week, the Treasury has made two buybacks. Before the publication of the September labor market report, the Treasury repurchased $3.4 billion in debt earlier on Wednesday. The two transactions follow Friday’s decline in US Treasury yields on the 10-year note to 4.06%. It is at its lowest point since the end of October.
Some experts believe that the postponement of the September labor report is the cause of the yield decrease. According to the study, employment outperformed projections in September, despite the downward revision of August statistics. The unemployment rate increased to 4.4%, the highest level in nearly four years, according to the data.
Bitcoin Dips Amid Stock Sell-Off as Treasury Yields Fall
Over the last 48 hours, yields on US Treasury bonds have drastically decreased. The stock and cryptocurrency markets, however, have hardly been affected by this. However, market watchers anticipate a reversal before the start of the upcoming workweek. Earlier in the week, Treasury yields had already decreased. This came after widespread liquidations in the cryptocurrency market began on Thursday and a sell-off in US stocks. The value of Bitcoin fell from $90,000 to $85,000 before dusk, while the US stock market index S&P 500 fell by 1.5% at the end of the day.
Lower Treasury yields, according to some analysts, might cause investors to reevaluate their holdings. They might switch from conventional bonds to riskier assets like cryptocurrency as a result of this. This pattern has given proponents of the cryptocurrency market hope that the erratic profit loss in digital assets that followed this week will be stabilized.
Markets Price in 70% Chance of December Fed Rate Cut
A more plausible scenario for cuts in December has now been priced by interest rate futures dealers. The likelihood of a quarter-point Fed rate drop at the next meeting rose, according to the CME FedWatch Tool. It increased to 70% on Friday from 30% on Wednesday. The likelihood of a rate cut in December was 50% just a week ago. The likelihood of a cut reached 99% a month ago, and markets were almost unified in their expectations. According to John Williams, president of the New York Federal Reserve, the central bank still has the ability to change interest rates. These changes, he claimed, might help move monetary policy closer to neutrality.
I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.
Williams
For more up-to-date crypto news, you can follow Crypto Data Space.
