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US Treasury yields rebound with stock futures on mixed concerns

  • US 10-year Treasury yields reverse the previous day’s losses around two-year high.
  • S&P 500 Futures ignore Wall Street losses to print mild gains.
  • US President Biden’s speech, PBOC rate cuts are the key catalysts.
  • US stimulus headlines encourage buyers of late, second-tier data eyed ahead of next week’s FOMC.

Market sentiment remains mixed during early Thursday, despite the latest gains of the US stock futures, as fears of hawkish monetary policy actions and geopolitical tensions battle stimulus hopes.

That said, the benchmark US 10-year Treasury yields rose 2.5 basis points (bps) to 1.852% after reversing from a two-year high of 1.90% the previous day. Further, the S&P 500 Futures rise 0.20% to 4,533 even as Wall Street benchmarks end Wednesday on a softer footing.

US President Joe Biden highlights Chief Trade negotiator Katherine Tai’s efforts to placate Sino-American trade tussles. However, he also mentioned that the US is “'not there yet' on possible easing of tariffs on Chinese goods”. Biden also said, “China is not meeting its purchase commitments.”

Further, comments favoring Federal Reserve (Fed) Chairman Jerome Powell’s push to recalibrate the support also raised concerns over faster rate hikes and balance sheet normalization, which in turn favored the US Treasury yields to recover the previous day’s losses.

It should be noted that Biden’s warning to Russia and hopes of getting the support of Senator Joe Manchin and Kyrsten Sinema to the Build Back Better (BBB) plan during Friday’s initial voting tested the investors but favored T-bond yields.

Following that, the People’s Bank of China’s (PBOC) surprised markets by the first cut in the 5-year Loan Prime Rate (LPR), by 5 basis points (bps) to 4.60% in 21 months.

Elsewhere, firmer Aussie jobs report and New Zealand’s cautious optimism ahead of witnessing the Omicron wave keeps the traders slightly positive during Thursday’s Asian session.

Moving on, developments over the US-China story and the Fed updates, not to forget geopolitics and stimulus, will entertain traders while the US Jobless Claims, Philadelphia Fed Manufacturing Survey for January and Existing Home Sales for December decorate the calendar.

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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