The market is torn between those who hope the worst will soon be in the past and those who believe the Fed will tighten policy further at a time when the strong dollar is increasing global tensions. The 10-year TIPS breakeven rate was last at 2.52%, reflecting the average inflation the market has priced in for the next decade. Federal Reserve might consider less aggressive inflation-curbing tactics after November. Traders are tired of selling. It is becoming time to change the station and recall that interest rates can go down as quickly as they have gone up and equities will benefit from this.
Trading recommendation: buy 3722 and take profit 3810.
Federal Reserve officials are preparing to roll out another super-sized interest-rate increase in early November, when they will also likely debate tactics for completing the most aggressive tightening cycle in four decades. Officials have been rapidly raising rates after being slow to tackle inflation that proved more persistent than expected. But with rates now approaching levels that could weigh on economic growth, policymakers are beginning to lay the groundwork for shifting to smaller moves that get them to the finish line without going too far, while leaving the door open to going further if inflation doesn’t abate. This is a positive signal for precious metals.
Trading recommendation: buy 1630 and take profit 1680.
When traders in the $24 trillion US Treasury market have trouble trading, it’s a matter for far wider concern. Liquidity metrics are flashing at crisis levels, making the debt market that’s a key underpinning of global financial markets potentially so fragile that another shock could impair its functioning. That’s why for the first time in more than two decades, the Treasury is considering buying back its bonds as a way of stabilizing the situation and buying time for policy makers to find more permanent solutions. A gauge of deviations in yields from a fair value model remains near the highest levels since March 2020, when a flight to cash prompted the Fed to begin buying securities to stabilize the market. What is Treasury thinking of doing? It’s deciding whether it will buy back older securities and replace them with larger current issues in either Treasury bills, or notes and bonds, depending on the government’s objective. This is a positive signal for the oil market.
Trading recommendation: buy 82.50 and take profit 86.00