{"id":63178,"date":"2023-09-19T20:06:19","date_gmt":"2023-09-20T00:06:19","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/how-feds-higher-for-longer-theme-may-play-out-in-treasurys-and-the-dollar-on-wednesday\/"},"modified":"2023-09-19T20:06:22","modified_gmt":"2023-09-20T00:06:22","slug":"how-feds-higher-for-longer-theme-may-play-out-in-treasurys-and-the-dollar-on-wednesday","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=63178","title":{"rendered":"How Fed\u2019s higher-for-longer theme may play out in Treasurys and the dollar on Wednesday"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002520254\" role=\"document\">\n<p>In the run-up to Wednesday\u2019s Federal Reserve policy decision, strategists at TD Securities are pinpointing two places in the financial market that are most likely to shift as the result of a continued higher-for-longer message on interest rates: Treasury yields and the U.S. dollar.<\/p>\n<p>In a note released on Tuesday, strategists Oscar Munoz, Gennadiy Goldberg, and Mark McCormick said they expect the 10-year Treasury yield<br \/>\n        BX:TMUBMUSD10Y<br \/>\n       to experience a slight bump-up from Tuesday\u2019s level of around 4.3% under their base-case scenario in which the Fed leaves open the possibility of another rate increase in November or December, while Fed Chairman Jerome Powell indicates that officials are in no rush to ease policy next year. The TD strategists also expect the U.S. dollar to edge higher. <\/p>\n<p>Wednesday\u2019s policy announcement by the Federal Open Market Committee is widely expected to produce a pause in rate hikes. Still, the update matters because of what it\u2019s likely to signal for the rest of the year and 2024, at a time when higher oil prices are adding to jitters about a revival in inflation. <\/p>\n<p>Powell\u2019s answer to the question of how long rates will stay high has the potential to undercut the 2023 stock-market rally, some said. Meanwhile, Joseph Davis, chief global economist and head of\u00a0Vanguard\u2019s\u00a0investment strategy group, said the Fed may need to possibly raise rates one to three more times from a current range of 5.25%-5.5%, and then stay at those elevated levels until late 2024.<\/p>\n<p><strong>Read:<\/strong> Why the Fed\u2019s response to this key question could spark a 5% stock-market pullback<\/p>\n<p>\u201cWe expect the Committee to continue shifting to a message of \u2018higher for longer,\u2019 though Powell\u2019s presser\/dot plot revisions might have a hawkish flavor to them as Fed officials are not ready to discard further rate increases,\u201d Munoz, Goldberg and McCormick wrote. Rates traders \u201chave already decreased pricing for 2024 cuts.\u201d <strong> <\/strong><\/p>\n<p>The TD strategists see a 70% likelihood of their base-case view coming to fruition, which they said should lead to a roughly 4-basis-point rise in the 10-year Treasury yield, a slightly more negative spread between 2- and 10-year rates, and a 0.1% rise in the Bloomberg Dollar Spot Index \u2014 all relative to Tuesday morning\u2019s levels. <\/p>\n<p>\u201cIt\u2019s really the backup in the long end of the Treasury market that\u2019s getting a lot of attention, and what\u2019s going to be the focus for a lot of investors,\u201d Goldberg said via phone on Tuesday. \u201cWe\u2019ve had a lot of repricing for higher-for-longer rates, which has been pushing long-end rates higher over the course of the past month or so. Everyone wants to know if the Treasury curve will keep steepening, driven by the long end and greater expectations for a soft landing.\u201d<\/p>\n<p>Under a more hawkish scenario \u2014 in which Fed officials strongly hint at another 2023 rate hike, downplay recent signs of cooling inflation, and project fewer 2024 rate cuts, while Powell also signals that more hikes are needed \u2014 the 10-year rate could rise by 8 basis points, the 2s10s curve would go even further below zero, and the Bloomberg gauge would jump 0.25% from levels seen early Tuesday, the TD team said.<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<p>          <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-inline\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<\/figure><\/div>\n<p>On Tuesday, the 10-year yield finished the New York session at 4.366%, its highest level since Oct. 31, 2007, based on 3 p.m. Eastern time figures. The 2s10s spread went more deeply negative at minus 74.3 basis points and all three major U.S. stock indexes<br \/>\n        DJIA<\/p>\n<p>        SPX<\/p>\n<p>        COMP<br \/>\n       ended lower.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/how-feds-higher-for-longer-theme-may-play-out-in-treasurys-and-the-dollar-on-wednesday-33ce4b19?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the run-up to Wednesday\u2019s Federal Reserve policy decision, strategists at TD Securities are pinpointing two places in the financial market that are most likely to shift as the result of a continued higher-for-longer message on interest rates: Treasury yields and the U.S. dollar. In a note released on Tuesday, strategists Oscar Munoz, Gennadiy Goldberg, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":63179,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-63178","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How Fed\u2019s higher-for-longer theme may play out in Treasurys and the dollar on Wednesday | iFintechWorld<\/title>\n<meta name=\"description\" content=\"In the run-up to Wednesday\u2019s Federal Reserve policy decision, strategists at TD Securities are pinpointing two places in the financial market that are\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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