US Treasury yields consolidate the biggest slump in five weeks, focus on Fed, Evergrande
US 10-year Treasury yields remain pressured after the biggest fall in multi-day.
Off in China allows bears to take a breather but Fed tapering woes, geopolitics back risk-off mood.
Second-tier US data may entertain traders ahead of the key Wednesday.
US 10-year Treasury yields seesaw around 1.31% during Tuesday’s Asian session. The risk barometer dropped the most since August 13 the previous day on spillover effects of China’s Evergrande. Also favoring the bond buyers were chatters surrounding US stimulus and the Federal Reserve (Fed).
With over $300 billion debt and multiple linkages to the global markets, China’s Evergrande hints at becoming another Lehman-like disruption even as the People’s Bank of China (PBOC) tries hard to defend the country’s biggest real-estate player. It should be noted that the off in Beijing limits the market’s reaction, even as Hong Kong takes the burden.
On a different page, the first in four-month recovery by the US NAHB Housing Market Index in September, rising 1 point to 76, renews Fed tapering concerns amid mixed data and policymakers’ previous push for monetary policy adjustments. It’s worth noting that the Fed is up for conveying the Summary of Economic Projections this week, as well as the dot-plot, to become the key weekly event.
Elsewhere, US Treasury Secretary Janet Yellen urged for another extension to the debt limit that is up for expiry in a few days to October while US Senator Joe Manchin pushed back President Joe Biden’s $3.0 trillion stimulus discussions back to 2022.
Amid these plays, global equities saw the red whereas the S&P 500 Futures print mild losses at the latest.
Given the risk-off mood, the US Dollar Index (DXY) should stay firmer around the monthly peak above 93.00, which in turn could weigh on commodities and Antipodeans like AUD/USD and NZD/USD. However, gold seems to benefit from equity rout but needs validation amid a sluggish mood.
Read: Can the Fed disrupt stock market gains, and why China’s evergrande is causing wobbles elsewhere