US 10-year Treasury yields refresh 15-week top with eyes on Fed tapering, US debt limit and China

  • US 10-year Treasury yields print five-day uptrend, sidelined of late.
  • Fed’s Bulls reiterate support for tapering, Fed Chair Powell backed the move yesterday.
  • US policymakers jostle to avoid debt ceiling expiry, President Biden cancels Chicago visit.
  • US diplomatically reaches China to cut imports from Iran, Evergrande approaches coupon payment date.

US 10-year Treasury yields remain on the front foot for the fifth consecutive day, around 1.55% amid Wednesday’s Asian session.

The risk barometer jumped to the highest since mid-June the previous day on the market’s rush to risk safety.

The risk aversion wave took clues from the mounting concerns over the US Federal Reserve’s (Fed) imminent tapering of bond purchases, as well as fears concerning China and Evergrande. Also weighing on the sentiment were downbeat data from China and the US.

Recently, St. Louis Federal Reserve President James Bullard said that he sees Fed going ahead with starting taper in November. On Tuesday, Fed Chairman Jerome Powell narrated inflation and employment stories to justify the central bank’s uttering of the word ‘taper’ during his testimony to Congress.

Also contributing to the risk-off mood were the headlines concerning China and Evergrande. While the People’s Bank of China (PBOC) tried to defend the money flow with heavy liquidity injection, the World Bank and the Asian Development Bank (ADB) cited worries over the dragon nation’s economic growth by citing power cuts in addition to Evergrande problems.

It’s worth noting that Reuters recently quoted the US and European Union (EU) diplomats while saying, “The United States has reached out to China diplomatically about reducing its purchases of Iranian crude oil as Washington seeks to persuade Tehran to resume talks about reviving the 2015 nuclear deal.”

Additionally, US stimulus and debt limit news also exerted downside pressure on the market sentiment. Recently, US President Joe Biden’s canceled visit to Chicago to lead negotiations over his legislative agenda after the Democrats got defeated at the Senate to extend the debt ceiling and US Treasury Secretary Janet Yellen warned of empty pockets by October 18.

Looking forward, Fedspeak and the second-tier US housing numbers may entertain traders but headlines concerning stimulus, debt limits and China will be the key to follow for fresh impulse.

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