US 10Y TREASURY: Warsh nomination eased yields
There has been two important news for investors during the previous week. The first was related to the FOMC Meeting, where the Fed decided to hold interest rates, which was highly expected. The second important news was related to the nomination of Kevin Warsh as the next Fed Chair in May. Markets generally positively reacted to this news, considering their fears over independence of the Fed from political influence.
At the start of the previous week the 10Y Treasury yields tested 4,2%, however, soon reverted back toward the higher grounds. The highest weekly level was at 4,27%, however, closing level is 4,24%. The rise in rates reflected traders pricing in a potential shift in policy direction. Warsh’s blend of past hawkish criticism of the Fed’s balance sheet and mixed views on rate cuts has contributed to uncertainty, prompting slight upward pressure on 10Y yields even as short-term rate expectations moved differently. For the moment, further relaxation of 10Y yields is quite possible. In this sense, yields could test for one more time the 4,2%. The week ahead brings JOLTs and Unemployment data for December, which might increase volatility a bit.