USD, Bond Yields and Stock Markets Fall! Dovish FED to Come?
Bond yields have been on a bullish trend this month, helping keep the USD in demand as well, but they’ve been reversing lower this week as we head into the FOMC, and the more the FED meeting approaches the steeper the decline is becoming. Today 10-year US Treasury yields are making a break to the downside, as they fall below 4% while stock markets fall after a really strong rally, so it seems like markets are smelling a dovish tilt from the FED.
Yesterday we also had the earnings reports from major companies with Microsoft, Alphabet and AMD presenting results after the US session ended, however, the market did not digest the numbers well. So, the rout in stocks started late yesterday and today the major indexes are even weaker, S&P 500 opening a gal lower and continuing to slide, while the NASDAQ index is down around -3%.
US Bond Yields Crash Lower
- Two-Year Treasury Yields: Decreased by 17 basis points to 4.20%
- Five-Year Treasury Yields: Decreased by 12.0 basis points to 3.87%
- Ten-Year Treasury Yields: Decreased by 10.6 basis points to 3.950%
- 30-Year Treasury Yields: Decreased by 6.7 basis points to 4.20%
Yields are falling dramatically, and the USD follows suit. In forex, this is most visible in USD/JPY which has lost 150 pips. Such major changes in the market point to a dovish FED later today after some poorer US wage data and ADP figures, as well as renewed concerns about regional US banks. The market now expects 147 basis points of rate decreases by the FED, up from 130 basis points on Monday.
Some investors have shifted their attention to New York Community Bancorp, whose stock price is down around 40% after slashing its dividend by 2/3rds. They purchased assets from failing Signature Bank last year and Flagstar Bank in 2022. However, the main reason for the decline today is the FOMC meeting, which is expected to lean on the dovish side, as rate cut odds for this year show.
USD/JPY Live Chart
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