{"id":10071,"date":"2023-11-06T07:14:43","date_gmt":"2023-11-06T07:14:43","guid":{"rendered":"https:\/\/infundpros.com\/news\/markets-reconsider-the-peak-rates-outlook\/"},"modified":"2023-11-06T07:14:44","modified_gmt":"2023-11-06T07:14:44","slug":"markets-reconsider-the-peak-rates-outlook","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=10071","title":{"rendered":"Markets Reconsider The Peak Rates Outlook"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<p>We\u2019ve been here before, but after Wednesday\u2019s decision by the Federal Reserve to leave interest rates unchanged, along with comments from Fed Chairman Jerome Powell, investors are wondering anew if the policy tightening regime has peaked.<\/p>\n<p>By some<span class=\"paywall-full-content invisible\"> accounts the latest slide in the 10-year US Treasury yield is helping tip the scale in favor of the peak rates forecast. The benchmark rate slipped for a third day on Thursday (Nov. 2) to 4.67%, a three-week low. Two weeks earlier the 10-year rate had been trading around the 5% mark.<\/span><\/p>\n<p class=\"paywall-full-content invisible\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/11\/saupload_ten.yr1_.03nov2023.png\" alt=\"UST10Y\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible\">Analysts say that Fed Chairman Powell\u2019s comments on Wednesday suggest the central bank may be done with rate hikes. In particular, markets focused on his observation that the recent rise in bond yields since the summer was doing the central bank\u2019s work, which lessens and perhaps eliminates the need for additional<span class=\"paywall-full-content no-summary-bullets invisible\"> rate hikes by the Fed.<\/span><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\u201cPowell\u2019s comments in the presser [on Wednesday] were what everyone wanted to hear,\u201d says Justin Burgin, vice president of equity research at Ameriprise Financial.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Fed funds futures continue to lean toward the view that the current 5.25%-to-5.50% range for the target rate will mark the top for the cycle. The market is pricing in an 80% probability that the central bank will leave rates unchanged again at the next FOMC meeting on Dec. 13.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/11\/saupload_ff.futures.probs_.2023-11-03.png\" alt=\"current Fed funds target rate\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Rates may have peaked, but the prospect of substantially lower yields in the near term is less convincing. Note that the 10-year yield in the chart above is still trading well above its 50- and 200-day moving averages. Until the trend profile reverses \u2013 the 50-day average falling below the 200-day average would be a strong indication \u2013 it\u2019s reasonable to assume that the higher-for-longer narrative still applies.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\u201cWe think 5.5% long-term 10-year yields in the US is the level that seems consistent with the macro backdrop in the next five years,\u201d says Jean Boivin, head of the BlackRock Investment Institute and a former deputy governor of the Bank of Canada. \u201cIt\u2019s also consistent with the compensation for risks that bond investors should require to invest in long-term bonds.\u201d<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Boivin\u2019s view aligns with Powell\u2019s comments this week: \u201cThe fact is the committee is not thinking about rate cuts, right now at all. We\u2019re not talking about rate cuts.\u201d<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The policy-sensitive 2-year Treasury yield, however, continues to lean into the idea that the Fed funds rate has peaked and may be ripe for a cut at some point in the near future. That\u2019s based on the fact that the 2-year yield, which is widely watched as a proxy for rate expectations, continues to trade comfortably below the target rate.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/11\/saupload_ff.2yr.rates1_.2023-11-03.png\" alt=\"US 2-year Treasury yield vs. Fed funds effective rate\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<figure class=\"paywall-full-content invisible\"><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Nonetheless, the upside trend in the 2-year rate has yet to reverse after its recent run higher. Instead, this key rate appears to be in a holding pattern, which implies that the status quo for rates will prevail for now.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/11\/saupload_two.yr_.03nov2023.png\" alt=\"UST2Y\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Meanwhile, monetary policy remains relatively tight, as the chart below suggests.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/11\/saupload_ff.analytics12023-11-03.png\" alt=\"Fed funds vs. unemployment rate + consumer inflation rate\" contenteditable=\"false\" loading=\"lazy\"> <\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Macro and geopolitical factors are now in focus for estimating the path of least resistance for rates in the weeks and months ahead. The crucial variables: incoming inflation and economic data and the evolution of the Middle East conflict.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">There are various risks lurking, but markets have priced in current conditions. A wider Middle East war or surprises in economic data could quickly change the calculus, but for now the status quo prevails, laying the groundwork for a precarious calm.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Original Post<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Editor&#8217;s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4647913-markets-reconsider-peak-rates-outlook?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>We\u2019ve been here before, but after Wednesday\u2019s decision by the Federal Reserve to leave interest rates unchanged, along with comments from Fed&#8230;<\/p>\n","protected":false},"author":1,"featured_media":10072,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":{"0":"post-10071","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Markets Reconsider The Peak Rates Outlook | inFundPros<\/title>\n<meta name=\"description\" content=\"We\u2019ve been here before, but after Wednesday\u2019s decision by the Federal Reserve to leave interest rates unchanged, along with comments from Fed Chairman\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=10071\" \/>\n<meta property=\"og:locale\" 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