Financial Associated Press (Shanghai, Editor Xiaoxiang) News, U.S. bond yields in each cycle continued the surge at the beginning of the new year on Thursday (January 6), with the benchmark 10-year U.S. bond yield once refreshing during the session A new high since March 2021. With the minutes of the Federal Reserve's December meeting released on Wednesday unexpectedly extraordinarily hawkish, the risk of quantitative tightening (QT) seems to have become the number one enemy of financial markets at the moment.
U.S. stocks also closed down again on Thursday, with the Dow Jones Industrial Average falling 170 points and the Nasdaq Composite Index falling for the third consecutive trading day.
market data shows that the indicator 10-year bond yield rose to 1.7530% intraday on Thursday, the highest level since March 2021. 's late increase narrowed slightly, and finally rose slightly by 1.46 basis points throughout the day. reported 1.725%.
The two-year U.S. Treasury yield, which is most sensitive to short-term interest rate expectations, once rose to 0.87%, the highest level since the outbreak of the epidemic in early March 2020, and rose 3.4 basis points to 0.867% in late trading. In addition, the 5-year U.S. Treasury yield rose 3.78 basis points to 1.475%, and the 30-year U.S. Treasury yield hit an 11-week high of 2.138% during the session, but fell back in late trading and finally fell 1.92 basis points to 2.079%.
As of Thursday, the U.S. 10-year Treasury bond yield has risen by about 22 basis points so far this week, and is expected to record the largest weekly increase since June 2020. U.S. two-year bond yields also rose about 15 basis points and were on track for their biggest weekly gain since October 2019.
The risk of quantitative tightening has become the market's number one enemy
The minutes of the latest Federal Reserve meeting released on Wednesday showed that officials have discussed reducing the Federal Reserve's balance sheet and raising interest rates earlier than expected to combat inflation. Many officials believe that this time the Federal Reserve will reduce its balance sheet. will be faster.
In this regard, many industry insiders pointed out that the hawkish signal released by the Fed meeting minutes has strengthened the view of those in the camp who believe that the Fed will have to act more decisively to curb inflation, which may prompt more people to bet on a rise in U.S. bond yields , and will also continue to impact the growth stocks and technology stocks that pushed up the U.S. stock market last year.
The trend of federal funds futures shows that as the market further digests the hawkish stance released by the Federal Reserve minutes on Thursday, traders' expectations for the probability of the Federal Reserve raising interest rates in March have further increased to 86%. At the same time, traders’ expectations for the number of interest rate hikes by the Federal Reserve this year have also begun to move towards 4 times. The interest rate futures market has fully priced in 3.5 interest rate hikes:
The Federal Reserve’s voting committee this year and the President of the St. Louis Fed, who changed his position from dove to hawk last year, announced Federal Reserve Chairman James Bullard also said on Thursday that the Fed may start raising interest rates as early as March and then shrink its balance sheet as the next step to curb inflation.
"Asset purchases will end in the coming months, but the FOMC may also choose to let the balance sheet shrink passively to reduce monetary easing at an appropriate pace," Bullard said. He also noted that shrinking the balance sheet "could be one of the next steps."
In the last time the Fed began tapering QE in 2014, the Fed's balance sheet remained stable for about three years, but the current surge in U.S. consumer prices may mean that the Fed needs to be more aggressive this time around to taper its balance sheet. $8.7 trillion balance sheet.
Rob Daly, head of the fixed income department of Glenmede Investment Management, said, "The Fed's statement on reducing its balance sheet shows that they realize that they are far behind the situation and are currently focusing on raising interest rates and tightening financial conditions."
The market will tonight Ushering in the first non-agricultural night of the year
Looking ahead, the market is about to usher in the first non-agricultural night of 2022 - the U.S. Department of Labor will release December non-farm employment data at 21:30 Beijing time tonight.
At present, economists generally expect that non-farm employment will increase by 424,000 this time, and the unemployment rate is expected to drop to 4.1% from 4.2% in November, but will still be higher than the 3.5% in February 2020. 50 year low.
Previously, the ADP employment data released on Wednesday, known as the "small non-agricultural sector", performed particularly strongly, which made many people in the industry have high expectations for tonight's non-agricultural sector. Data showed that U.S. ADP employment increased by 807,000 in December, far exceeding expectations of 410,000 and the previous value of 534,000.This is the best reading for the job market since 882,000 in May 2021, according to ADP.
ADP chief economist Nela Richardson said, "The U.S. job market strengthened in December, mainly due to the subsidence of the impact of Delta, while the impact of Omicron has not yet been felt. Employment growth was broad-based, with goods producers bringing in the The strongest data, while service providers led employment growth."
Another non-farm forward indicator released on Thursday showed that the number of people applying for unemployment benefits in the United States increased last week, but was still close to historical lows, and the labor force The market has weathered the latest wave of COVID-19. Data released by the U.S. Department of Labor on Thursday showed that in the week ending January 1, the number of people applying for unemployment benefits for the first time totaled 207,000, an increase of 7,000 from the previous week. The median estimate of economists surveyed by the media was 195,000. Yeap Jun Rong, a strategist at
IG Asia Pte, said earlier, "Given the Fed's shift to a faster reduction in bond purchases, with three rate hikes expected in 2022, this week's non-farm payrolls report will become a key market risk event. Of course, if the upcoming jobs report disappoints, it could cool some bets on a rate hike."
This is the best reading for the job market since 882,000 in May 2021, according to ADP.ADP chief economist Nela Richardson said, "The U.S. job market strengthened in December, mainly due to the subsidence of the impact of Delta, while the impact of Omicron has not yet been felt. Employment growth was broad-based, with goods producers bringing in the The strongest data, while service providers led employment growth."
Another non-farm forward indicator released on Thursday showed that the number of people applying for unemployment benefits in the United States increased last week, but was still close to historical lows, and the labor force The market has weathered the latest wave of COVID-19. Data released by the U.S. Department of Labor on Thursday showed that in the week ending January 1, the number of people applying for unemployment benefits for the first time totaled 207,000, an increase of 7,000 from the previous week. The median estimate of economists surveyed by the media was 195,000. Yeap Jun Rong, a strategist at
IG Asia Pte, said earlier, "Given the Fed's shift to a faster reduction in bond purchases, with three rate hikes expected in 2022, this week's non-farm payrolls report will become a key market risk event. Of course, if the upcoming jobs report disappoints, it could cool some bets on a rate hike."
