when Fed Chairman Jerome Powell said officials have discussed tapering bond buying and would at some point decide to begin the process of slowing the purchases. At the same time, Fed officials added two rate hikes to their 2023 forecast, where there were none before.
U.S. longer-dated Treasurys, like the 10-year, have been lower than many strategists had expected lately. In part, that's because they are highly attractive to foreign buyers due to negative rates in other parts of the world and liquidity in the U.S. markets. The 10-year yield shot to 1.59% after the Fed news, but was back down at 1.5% Thursday afternoon. Yields move opposite price.
Boockvar said the curve flattening has been happening swiftly, too. For instance, the spread between the 5-year yield and 30-year bond yield quickly compressed, moving from 140 basis points to 118 basis points within two days. For stock investors, the shift in cyclical stocks goes against a trade that has been popular as the economy reopened. Financial stocks fell on the flatter yield curve, but REITs were slightly higher. Technology stocks were up 1.2%, and health care gained 0.8%.
But Emanuel said it will be difficult to tell whether inflation is fleeting or not, and the economy's emergence from the pandemic has been difficult to predict. "Whether it's the Fed or paid economists on the sell side, or paid economists on the buy side, the ability to measure what's going on in the economy is really nothing more than...
The market expectations for rate hikes have moved forward, and the euro dollar futures market now sees four rate hikes by the end of 2023, according to Marc Chandler of Bannockburn Global Forex. Prior to the Fed's announcement Wednesday, futures showed expectations for about 2.5 rate hikes.
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