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Global & Economy
Source: Newsmaker.id
US government bond yields edged lower in Tuesday’s (Oct 20) trading session following reports that Washington and Tehran might be nearing an agreement. Other reports, however, indicate that negotiations are still ongoing and no final deal has been reached.
The yield on the 10-year US Treasury note fell by nearly 2 basis points to 5.123%, with the initial decline triggered by geopolitical news that also exerted downward pressure on oil prices. Meanwhile, the 2-year Treasury yield—which is sensitive to interest rate expectations—stood at 4.789%.
The decline in yields coincided with a recovery in the US stock market. At the same time, the price of WTI crude oil fell by 0.67% to US$97.58 per barrel, while the US Dollar Index (DXY) dropped 0.32% to 101.66.
On the economic front, US pending home sales plummeted 7.3% in September—a significantly worse outcome than the 0.5% decline that had been anticipated. This weakness is attributed to rising mortgage rates, which continue to weigh on demand within the housing sector.
The market currently expects the Federal Reserve to keep interest rates unchanged at its October meeting. However, expectations for a rate hike in December remain high, with a probability of approximately 89% according to Prime Terminal.
Newsmaker Analysis: Current movements in the Treasury market suggest that investors remain highly sensitive to both geopolitical developments and expectations regarding Federal Reserve policy. Should US-Iran negotiations yield tangible progress, a decline in energy prices could help alleviate inflationary pressures, potentially creating room for yields to fall further. Meanwhile, weakening economic data serves as another critical factor, as it may reinforce the view that the Federal Reserve will not be in a rush to tighten monetary policy.
Source: Newsmaker.id