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U.S. Treasury Interest Rates Decline As Fed Minutes Indicate Slower Rate Hikes

Charlie Brooks

Nov 24, 2022 14:13


Following the release of the minutes from the Federal Reserve's most recent policy meeting, global markets increased and U.S. Treasury yields fell on Wednesday. The minutes indicated that U.S. central bankers want to decrease the rate of interest rate increases in the near future.

According to the meeting minutes, a "substantial majority" of Fed policymakers agreed that it would "likely be prudent" to suspend the rate of interest rate rises in the near future. In light of recent economic data, traders predicted that the Fed minutes would reaffirm officials' softening stance.

According to data issued by the U.S. Department of Labor on Wednesday, last week's first claims for unemployment insurance increased more than anticipated. According to the flash U.S. Composite PMI Output Index from S&P Global (NYSE:SPGI), business activity in the United States dropped for the fifth consecutive month in November.

"I believed that there were no true surprises. They appear to continue to underline that inflation risks remain significant and that recent data has been more stable than expected "Jordan Kahn, chief investment officer at ACM Funds in Los Angeles, stated.

"People will be thrilled to learn that a number of respondents emphasized the need to control the rate of interest rate hikes. Prior to the release of these minutes, the market had already priced in a 50 basis point rate rise for December, and the chance of a 50 basis point hike on the Fed futures market was approximately 70% "Kahn noted.

The MSCI All Country Index rose 0.85%, while European equities rose 0.6%.

After the Fed's minutes were released, Treasury rates declined. The yield on benchmark 10-year notes fell to 3.6908 percent, while rates on 2-year notes dipped to 4.4773 percent.

The yield curve comparing these two bonds remained in negative territory at -76.30 basis points. When this component of the curve inverts, a recession is anticipated.

Kahn continued, "The Fed has been rising interest rates by 75 basis points, a rate that was just unsustainable."

Wall Street's three major indexes finished higher, led by gains in the technology, discretionary consumer goods, communications, healthcare, and industrial sectors.

The Dow Jones Industrial Average jumped 0.28 percent to 34,194.06, while the S&P 500 rose 0.59 percent to 4,027.26 and the Nasdaq Composite rose 0.99 percent to 11,285.32.

As the Group of Seven (G7) nations discussed a price ceiling on Russian oil above the current market level and as gasoline stocks in the United States expanded faster than analysts had predicted, oil prices fell by more than 3 percent.

Brent futures for delivery in January lost 3.3% to $85.41 per barrel, while U.S. oil slid 4.36 % to $77.42 per barrel.

Following the release of the Fed's minutes, the U.S. dollar plummeted across the board. The dollar index fell 0.915%, while the euro rose 0.9% to $1.0395 per euro.

The value of gold increased as the U.S. dollar fell. Spot gold jumped by 0.5% to $1,749.40 per ounce, whilst U.S. gold futures advanced by 0.6% to $1,749.70 per ounce.