Update on world markets.
US markets slumped on Wednesday as the US Federal Reserve maintained key interest rates while suggesting that it will continue to do so again this year. The US central bank also raised GDP projections while issuing a warning that the battle against inflation was far from done.
The Federal Open Market Committee (FOMC) states that decision-makers will decide about the “extent of further policy firming that may be appropriate.”
According to Chair Chairman Jerome Powell, the Fed is “prepared to raise rates further if appropriate,” and “we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.”
Some investors are benefiting from the low Treasuries prices because of the anticipation that a forthcoming rise in interest rates will increase the demand for U.S. government debt. They are anticipating the Fed’s decision at its meeting on Wednesday about its monetary policy. The better-than-expected economic growth over the past year has caused the yields on maturities to remain high, which has allowed the Fed to maintain high interest rates. Investors that placed bets on lower interest rates experienced losses as a result of this.
Reuters, NEW YORK, Sept. 19 – Some investors are buying into the weakness in Treasuries as they sway ahead of the outcome of the Federal Reserve’s monetary policy meeting on Wednesday, believing that a peak in interest rates will eventually support the market for U.S. government debt. It’s a wager that has lost money multiple times over the past year as investors have had to reevaluate their expectations for when the U.S. central bank will lower interest rates due to stronger-than-expected economic growth, which has kept Treasury yields high. Bond price movements and yield movements are mutually exclusive. Bullish investors, however, think that the peak in rates and, consequently, Treasury yields is nearing because of waning inflation and impending challenges to U.S. GDP in the fourth quarter. According to Chris Diaz, portfolio manager and co-head of global taxable fixed income at Brown Advisory, “Our judgment is that the Fed is done (increasing rates). Growth will deteriorate if things continue as they are, which will allow the Fed to decrease rates.
On August 22, yields on the standard 10-year Treasury note reached 4.366%, the highest level since 2007. Their rise in recent weeks underscores the belief that the Fed is likely to keep rates at their current levels for a longer period of time than many investors had anticipated.
Others, though, assert that it’s only a matter of time before the Fed’s tightening of monetary policy puts pressure on the economy and compels decision-makers to lower interest rates. Furthermore, many think there is minimal risk associated with government bonds since the 10-year Treasury yield rose by 400 basis points from its post-pandemic low.
- Published By Team Nation Press News