US Treasury yields hover around 2.5-year high, S&P 500 Futures drop 0.50% amid risk-off mood

  • US 10-year Treasury yields keep post-Inflation gains around multi-day high.
  • S&P 500 Futures, Asia-Pacific shares remain pressured as monetary policy contraction looms.
  • US warning over Russia attack, fresh fears from North Korea and concerning Sino-American trade ties also challenge the sentiment.
  • Fedspeak, US consumer sentiment data will be important for near-term directions.

Market sentiment sours during Friday’s Asian session as traders fear faster run-up to the rate hikes at the major central banks. Also weighing on the risk appetite are chatters surrounding Russia, China and North Korea.

While portraying the mood, the US 10-year Treasury yields remain firmer around the highest levels since July 2019, up one basis point at 2.035% by the press time. Further, the S&P 500 Future dropped 0.50% at the latest and the Asia-Pacific shares are also mostly down amid market fears from multiple catalysts.

Although nearly five-decade high US inflation stole the show on Thursday and drowned US equities, they aren’t the only hawks on the street as RBNZ also cited upbeat concerns while Banxico raised rates as well.

That said, the US Consumer Price Index (CPI) for January rallied to a nearly five-decade high with a 7.5% YoY figure, versus 7.3% expected and 7.0% prior.

Although the hot inflation figures were already expected, St. Louis Fed President James Bullard went a step farther while supporting 100 bps rate hikes by July and for the balance sheet reduction to start in the second quarter. Fed’s Bullard also cited the potential for 50 basis points (bps) of Fed rate hike in March.

Following that, Federal Reserve Bank of Richmond President Thomas Barkin said that the US economy will likely return past the pre-covid trend this quarter. Though, Fed’s Barkin wasn’t as hawkish as Bullard while saying that he would have to be convinced of a 'screaming need' for a 50 bp hike.

Elsewhere, the Reserve Bank of New Zealand (RBNZ) said that Official Cash Rate (OCR) expectations continue to rise in the short and medium-term, per survey of expectations business February 2022. It’s worth noting that the central bank of Mexico announced a 0.50% rate hike the previous day.

On a different page, US President Joe Biden confirmed the earlier notice from the US Statement Department to all citizens to leave Ukraine “right now” during an interview with NBC News. On the same line were fears of US-North Korea tussles as the hermit kingdom refrains from the global push towards dumping the missile tests. Furthermore, recently increasing US-China trade tussle also contributes to the risk-off mood.

Moving on, market players will pay major attention to the comments from the Fed policymakers to determine odds of a 0.50% rate hike in March. Also important is the US Michigan Consumer Sentiment Index for February, expected 67.5 versus 67.2 prior.

Read: Forex Today: Inflation in the eye of the storm

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