US Treasury yields stay firmer on hawkish Fedspeak, geopolitical fears amid a quiet session
|- US 10-year Treasury yields pare recent losses around 1.79%, S&P 500 Futures drop 0.30%.
- Fed’s Kashkari, Bostic keep 50 bps rate-hike expectations on the table, emphasize on data.
- US Senate braces for a law to sanction Russia, US data came in mixed.
Global markets struggle to extend Friday’s corrective moves as challenges to risk appetite regain strength. Among them, comments from the US Federal Reserve (Fed) officials and geopolitics gain major attention amid a light calendar during Monday’s Asian session.
That said, the benchmark US 10-year Treasury yields rose 1.6 basis points (bps) to 1.796% whereas the S&P 500 Futures drop 0.30% intraday at the latest. It should be noted that off in China restricts Asia-Pacific market moves of late.
On Friday, markets raised doubts on the Fed’s hawkish action in March following softer prints of the US Q4 Employment Cost Index (ECI). However, strong readings of the Fed’s preferred gauge of inflation, namely Core PCE Price Index for December rose to 4.9%, versus 4.8% forecast and 4.7% prior, keeping the Fed hawks on the table.
Following the US data release, Federal Reserve Bank of Minneapolis President Neel Kashkari said that he expects Fed to raise rates at the March meeting. Though, the policymaker emphasized the importance of incoming data while also saying, “Have to see how data plays out.”
On the same line was Raphael Bostic, president of the Fed’s Atlanta branch who reiterated his call for three Fed rate lifts in 2022, in an interview with the Financial Times (FT), with the first coming in March. “If the data say that things have evolved in a way that a 50 basis point move is required or [would] be appropriate, then I’m going to lean into that . . . If moving in successive meetings makes sense, I’ll be comfortable with that,” said Fed’s Bostic per FT.
It’s worth noting that the US Senate's aggression towards passing a law to sanction Russia weighs on the risk appetite. “US senators are very close to reaching a deal on legislation to sanction Russia over its actions on Ukraine, including some measures that may take effect before any invasion, two leading senators said on Sunday,” said Reuters.
Elsewhere, the virus woes worsen in Japan while Turkish President Erdogan fired another diplomat on disappointing inflation data. Further, Australia data came in mixed and New Zealand PM Ardern is waiting for her covid reports after one of the office staff traveled with covid positive.
Moving on, US jobs report and monetary policy meetings from the BOE, ECB and RBA will be crucial moving forward. For today, a light calendar emphasizes the risk catalysts as the key drivers.
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