Forex News May 26, 2022

 

Treasury yields

  • Ten-year Treasury yields have fallen to a six-week low.
  • The bond market remains an interesting place to watch, and after the unrelenting selloff (due to deleveraging pressures) in March and April, we are seeing steady bids in the last three weeks. It may be overdue after a year of one-way traffic, with 10-year Treasury yields more than doubling from 1.60 percent to a high of 3.20 percent just three weeks ago.
  • Given that we have somewhat fully priced in Fed hawkishness (at least for the time being) in terms of what policymakers are signalling, it is a potentially significant trigger for bond selling to slow.
  • The market now expects a lower and earlier terminal rate than a month ago, which makes sense.
  • In this regard, the market may be sensing that the Fed’s window for tightening is closing. And one could argue that this is undoubtedly due to stagflation and rising recession risks.

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