(Bloomberg) — Treasury yields climbed as trading resumed after a US holiday, with investors showing concern the Federal Reserve may be reticent to cut interest rates as early as March.
Most Read from Bloomberg
Yields on US notes gained across the curve in Asia trading on Tuesday, echoing similar earlier moves in European debt after hawkish comments from European Central Bank policymakers.
A possible pivot to rate cuts by the Fed has been the center of market attention as inflation slowed from its peak in mid-2022. Investors are awaiting a speech by Fed Governor Christopher Waller scheduled for Tuesday after Chair Jerome Powell gave a clear signal in December that a series of rate cuts was in the pipeline for 2024.
“There has been a chorus of Fed and ECB officials trying to tame market expectations for aggressive rate cuts,” said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities in Singapore. “For quite some time the market has ignored their utterances, but it does appear the market paid some attention to ECB comments overnight.”
Threats stemming from lingering inflation and geopolitical risks will prevent the ECB from lowering interest rates this year, Governing Council member Robert Holzmann said in an interview.
The rise in yields boosted the US currency against its peers. The Bloomberg Dollar Spot Index gained as much as 0.3% to 1,230.94 as of 12:35 p.m. Singapore time on Tuesday. An advance beyond the Jan. 5 high of 1,231.44 would bring the gauge to the highest since mid-December.
The dollar’s gain has been driven by higher US yields, said Mingze Wu, a currency trader at Stonex Financial Pte. in Singapore. “It might just be the market is finally out of hangover mood and having the clarity moment that Powell might not be cutting rates at all this year.”
–With assistance from Matthew Burgess.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.