February 19, 2018

Treasury yields jump as traders position for higher rates

28 September 2017, 12:05 | Kenneth Drake

Interest rates are expected to remain unchanged on Thursday

Interest rates are expected to remain unchanged on Thursday

Shortly after the opening bell, the Dow Jones Industrial Average rose 62.10 points, or 0.28 percent, to 22,346.42. With regard to the labor market, Yellen commented that there is a risk of overheating and this could lead to an inflationary problem. An index of European banks rose 1.5 percent as the pan-European STOXX 600 share index rose 0.3 percent to a 10-week high.

St. Louis Fed President James Bullard speaks on the US economy at an event in Missouri, and on Thursday the Bank of England hosts the "20 Years On" conference in London, marking two decades of independence from the government, beginning with remarks from BOE Governor Mark Carney. In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability. In the previous session, prices dropped 2.4%, their biggest one day fall since mid-August.

Gold is highly sensitive to rising United States interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the greenback. Trump has praised Yellen since taking office, saying he approves of the Fed's current low interest rates and respects the chair.

The US Dollar index, up 0.50% just ahead of Yellen's speech, pared gains to be quoted just 0.38% higher at 93.01 a short time after the remarks were delivered. Meanwhile, silver fell sharply after losing 1.87% of its value, yielding up to 16.86 dollars per troy ounce. With the lower dollar, tax reform, oil restive, tightish labour market and reconstruction all set to boost the U.S. next year the USD is starting to swing.

-The MSCI Emerging Market index sank 0.8 percent to the lowest in more than a month. The index is a measure of the U.S. dollar against a basket of other major currencies. The euro was at $1.1756-1757, down from $1.1812-1813, and at ¥132.48-49, up from ¥132.01-02.

Britain's blue chip FTSE 100 index fell 0.2 per cent to 7,285.74 points on Tuesday, weighed down by financials, while mid caps slipped 0.3 per cent on sharp, results-driven falls.

The Fed increased its benchmark lending rate twice in March and June, leaving it at a still-low range of 1 percent to 1.25 percent.

In energy markets, oil prices hit lower despite the EIA report showing that U.S. crude oil inventories declined by 1.846mn barrels the past week while analysts anticipated oil inventories to increase by 3.422m barrels.

The US dollar has built added to September's modest gains with another 1.3% rally this week, breaking the downtrend channel in place since the April highs.

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