|Day's Range||2.8770 - 2.9000|
|52 Week Range||2.3670 - 3.2480|
Ahead of the meeting, investors are expressing concerns about the U.S. economy and whether the Fed would hike further after December. As recent as September, the Fed came out as a little too optimistic about the economy next year. At this meeting, they may come down a little on their assessment of future economic growth. Investors aren’t expecting anything new from the Bank of Japan (BOJ). Look for policymakers to leave its benchmark rate unchanged at -0.1%. Japan is also scheduled to release its latest inflation data. The Bank of England (BOE) is expected to keep interest rates unchanged at Thursday’s meeting. Policymakers are holding back on raising rates at this meeting because of recent mixed economic data and fears over Brexit.
Hedge funds and other speculative investors are paring futures bets against the 10-year Treasury note, backing away from one of this year’s most-popular trades. Speculators have trimmed their bets on falling U.S. government bond prices and higher yields. An investor taking a short position in Treasury bond futures sells a contract, intending to profit by buying it back later at a lower price or delivering securities that could be sold at a lower price.
U.S. government debt prices rose on Friday as traders digested fresh economic data out of China and looked ahead to next week's Federal Reserve meeting. The yield on the benchmark 10-year Treasury note fell steeply to 2.875 percent, while the yield on the 30-year Treasury bond dropped to 3.136 percent. News of the disappointing figures comes as China and the U.S. try to negotiate a trade deal within a 90-day tariffs truce.
The risk of a U.S. recession in the next two years has risen to 40 percent, according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Federal Reserve interest rate rises next year. What has fueled concerns of a downturn is the flattening of the U.S. yield curve - with the spread between two- and 10-year note yields falling to less than 10 basis points, the smallest gap since the run-up to the last U.S. recession. A yield curve inversion has preceded almost all recessions over the last half-century.
The Federal Open Market Committee (FOMC) will hold a two-day meeting on December 18-19. It is expected to raise its benchmark interest rate 25 basis points, however, the focus for investors will be on the number of rate hikes protected for next year. Expectations for further rate hikes in 2019 have tempered lately due to fears of weakening U.S. economic growth.
Some economists expect the Fed to skip an interest rate hike in December. Though, a pause may call the Fed's credibility into question.
Prominent short seller Jim Chanos says he's concerned about the fragility of the stock market in response to increases in interest rates. "One of the things that worries me is just how fragile we seem to be to small rises in interest rates," Chanos told CNBC's Sarah Eisen. While government debt rates rallied for much of 2018 — sometimes sharply — borrowing costs are still far below historical norms.
U.S. government debt prices rose on Thursday as investors awaited developments in the U.S.-Sino trade dispute. At 04:50 a.m. ET, The yield on the benchmark 10-year Treasury note fell to 2.899 percent, while the yield on the 30-year Treasury bond dipped to 3.14 percent. Trade relations between the U.S. and China continue to dominate the headlines, as the two countries attempt to resolve their differences during a 90-day period for talks.
Two months ago, the uptick in inflation was topping out. Now data show price pressures are indeed abating
U.S. government debt yields held steady on Wednesday after a government report showed no change to consumer prices across the month of November. The Labor Department's Consumer Price Index was unchanged last month on a seasonally adjusted basis after rising 0.3 percent in October. Core CPI, which does not include volatile energy or food prices, increased 0.2 percent in November and is up 2.2 percent in the past 12 months.
It was the center of the last crisis, but before that housing prices tended to hold up and even rise modestly during an economic downturn as mortgage rates fell in tandem with interest rates. If history is any guide, the housing market could be the unlikely safe haven in the next recession once again. The U.S. housing market has weathered all the recessions since 1980, with the exception of the Great Recession of 2008, Jefferies pointed out in a recent note.
At 6 a.m. ET, NFIB Small Business Optimism Index is due, followed by Redbook at 08:55 a.m. ET. The yield on the benchmark 10-year Treasury note was up at 2.868 percent, while the yield on the 30-year Treasury bond was up at 3.134 percent. Investors continue to be concerned about a possible economic slowdown, as portions of the yield curve, which first inverted earlier this month, remained downward sloping Monday with short-term 2-year Treasury note yields above 5-year Treasury note yields.
Some consumer interest rates depend on the Federal Reserve’s actions, but not all of them do. Here’s a guide to help you know what to expect the next time the Fed hikes interest rates.
Investors are returning to emerging markets, hoping to find bargains after one of the worst selloffs in years. Flows into developing countries’ stocks and bonds surged in November to $33.9 billion, their highest level since January, data from the Institute of International Finance showed. After years of double-digit returns, emerging markets have been slammed in 2018 by a host of concerns, from a stubbornly strong dollar to a trade conflict between the U.S. and China.
Along with valuations and bond rates, perhaps the biggest difference today is the orientation of the Federal Reserve. Today, it’s 2 percentage points higher, another increase is likely, and the Fed is draining liquidity by reducing its $4 trillion balance sheet. “What’s happened is we’re moving from a nine year wonderful period of free capital to an environment where the cost of capital is starting to move higher,” Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merill Lynch, said on Bloomberg TV.
U.S. government bond prices climbed Friday after data showing strong wage growth and low unemployment failed to assuage investor concerns about trade tensions and slowing growth. Yields, which fall when bond prices rise, slipped throughout the afternoon Friday as stocks tumbled, pushing investors to the safety of U.S. government debt. The move reversed an early climb that accelerated after the Labor Department said that U.S. employers slowed their pace of hiring in November, adding 155,000 jobs—below the 198,000 predicted by economists surveyed by The Wall Street Journal.
U.S. government debt yields inched higher Friday after crude oil prices jumped nearly 5 percent, easing fears of falling inflation that have contributed to flattening of the so-called yield curve. A recent fall in oil prices has contributed to market anxieties that the Federal Reserve's inflation expectations may have been too high and that continued increases to the federal funds rate would be too much for debt-laden corporations to digest. The price of Brent crude, the international benchmark for oil prices, rose $2.92, or 4.86 percent to $62.90 a barrel by 9:04 a.m. ET.
Citigroup Inc. and Morgan Stanley agree on a December shift, but see just two increases next year. Risk-averse sentiment combined with the changed Fed outlook sent Treasury yields spiraling, in part as investors sought them as a haven.
Stocks surged in the late afternoon after The Wall Street Journal reported that Federal Reserve officials were considering stepping back from their predictable pace of quarterly interest-rate increases, reassuring investors who worried the central bank was on an overly aggressive path. An imbalance of buyers and sellers disrupted trading among bonds and other assets early in the session, traders said, spurring larger-than-average price fluctuations. The diminished liquidity is making it harder to buy and sell stocks, bonds and oil futures and exacerbating swings in the year’s final weeks, when markets are typically more subdued.
The S&P 500’s 50-day moving average hasn’t fallen below its 200-day since April 22, 2016, says Dow Jones Market Data
The volatility sweeping financial markets this week underscores investors’ growing unease about the durability of the nearly decadelong bull market, even as most economists see little risk of near-term recession. There is, overall, “a lot of tension in the air,” said Wen Lu, a U.S. rates strategist at TD Securities in New York.
A weekslong rally in government bonds has pushed the yield on the benchmark 10-year Treasury note below 3% for the first time since September, signaling some investors are increasingly worried about the pace of U.S. growth. This year’s climb in the 10-year yield—which helps set borrowing costs for companies, consumers and state and local governments—has stalled in recent weeks, weighed down by trade tensions, stock swings, falling oil prices and concerns that an economic slowdown outside the U.S. could weigh on the expansion here. Government bonds rallied after the U.S. and China reached a 90-day trade truce, and gained further Tuesday as the Dow Jones Industrial Average dropped nearly 800 points.
The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note. Joseph LaVorgna , chief economist of the Americas at Natixis, says the move has him "very worried" about what comes next. "The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens," LaVorgna told CNBC's " Trading Nation " on Tuesday.
U.S. flags will fly at half-staff, and U.S. markets, including trading on the New York Stock Exchange and Nasdaq, will grind to a halt in honor of the 41st president of the United States.