Key Points
- Fed rate cut odds fell to 50.7% from 63% the previous day, according to CME FedWatch.
- 10-year Treasury yield climbed to 4.121%, while the 2-year yield rose to 3.593%.
It has been a turbulent 24 hours for global markets as traders pared back expectations of a Federal Reserve rate cut in December, now viewed as a near 50-50 outcome. The reassessment came after a series of hawkish comments from Fed officials dampened hopes for early policy easing.
Alberto Musalem, President of the St. Louis Fed, said there was “limited room to ease further” without risking excessive accommodation.
Cleveland Fed’s Beth Hammack added that policy must remain restrictive to maintain downward pressure on inflation, while Minneapolis Fed’s Neel Kashkari reiterated his opposition to a cut last month, stating he remains undecided on December.
According to CME FedWatch, markets now price in a 50.7% probability of a 25-basis-point cut at the 10 December meeting, down from 63% a day earlier.
Bond Yields Firm, Dollar Slides
The yield on the 10-year Treasury note (US10Y) edged up to 4.121% from 4.111% the previous day, while the 2-year yield rose to 3.593% from 3.589%, reflecting a modest upward repricing in short-term rate expectations.
Despite firmer yields, the U.S. dollar index (USDX) fell 0.1% to 99.13, hovering near monthly lows. Analysts suggest that weaker sentiment in equities and risk assets limited the dollar’s ability to capitalise on yield gains.
The Dollar Index’s subdued performance underscores the market’s balancing act: higher yields on one side and growing economic uncertainty on the other.
Technical Analysis
The 10-year U.S. Treasury note (USNote10Y) trades around 112.71, up 0.01%, consolidating after rebounding from this week’s lows near 112.00. On the daily chart, yields have stabilised following sharp swings earlier in the month, with short-term moving averages (5, 10, 30) showing mild convergence.
The MACD indicator signals waning bearish momentum, with the histogram flattening around zero. Immediate resistance is seen near 113.00, with support around 112.00. A break above 113.00 could open the way toward 114.00, last tested in October.
Cautious Forecast
The tone from Fed officials and recent data suggest the central bank may opt to hold rates steady in December. A sustained break above 4.12% in the 10-year yield could pressure equities further, while a weaker USDX may offer partial relief to risk assets.
Traders will continue to monitor upcoming U.S. inflation revisions and Fed commentary, which remain key to shaping Treasury yields into year-end.
