Today will see theThe minutes of the Federal Open Market Committee (FOMC) will be issued today, but they are unlikely to have a big impact on the stock market. Second, the discourse looks to be moving toward balance sheet normalisation, sometimes known as quantitative tightening. The first reason is that three rate rises are practically totally priced in for 2022. In addition, Neel Kashkari, an Uber Dove, indicated yesterday that the Federal Reserve's earlier policy had been successful, but noted that the balance sheet was unlikely to return to pre-pandemic levels in the near future.
So far, the surge throughout the fixed asset complex has aroused the curiosity of returning traders, with the yield on the 10-year US Treasury note jumping to a little under 1.7 percent, its highest level since November. But this looked to be a FOMO trade, since a new year brought with it new risk constraints for traders, prompting popular trades such as short fixed income, and by extension, short JPY, to be re-engaged in the market again. In addition, increased confidence about the danger presented by the Omicron type would have certainly supported the rise upward in interest rates, particularly given the fact that the US curve had steepened a little bit. A trigger would be necessary to see that level firmly exceeded, however, since 1.7 percent on the 10-year note represents an important psychological hurdle that restrained gains in the fourth quarter of 2018.
So far, the surge throughout the fixed asset complex has aroused the curiosity of returning traders, with the yield on the 10-year US Treasury note jumping to a little under 1.7 percent, its highest level since November. But this looked to be a FOMO trade, since a new year brought with it new risk constraints for traders, prompting popular trades such as short fixed income, and by extension, short JPY, to be re-engaged in the market again. In addition, increased confidence about the danger presented by the Omicron type would have certainly supported the rise upward in interest rates, particularly given the fact that the US curve had steepened a little bit. A trigger would be necessary to see that level firmly exceeded, however, since 1.7 percent on the 10-year note represents an important psychological hurdle that restrained gains in the fourth quarter of 2018.
Comment:
Although the dollar is expected to strengthen more this year, and U.S. Treasury rates have risen, gold prices have maintained their respectably modest values so far. The safe-haven benefit has been essentially erased from the equation at this time, since markets seem to have made their intentions clear about the Omicron variation (minimal economic impact) (minimal economic impact). The increase in gold volatility, as measured by the Cboe Gold ETF Volatility Index (GVZ), has been a positive for gold, as seen in the chart below. As has historically been the case, gold prices have a positive association with this index, and if significant economic data releases this week surprise the markets, we might witness a continuation of the year-end gain in the GVZ index, and, as a result, further support for gold prices.
