TOKYO, Sept 26 — US Treasury yields scaled a fresh 16-year peak on Tuesday, underpinning the dollar near a 10-month summit, as investors responded to the message from the Federal Reserve and other major central banks of rates staying elevated for longer.
Traders now put the odds of another quarter-point Fed hike by January at a coin toss, and have pushed the likely start of rate cuts to summer. “We expect 10yr yields to establish a new, higher, yield range in coming weeks,” with a possible peak around 4.75 per cent, they said. “Medium term, we would be looking to get long at some stage, but that time is not yet upon us.”Chicago Fed President Austan Goolsbee said on Monday that inflation staying entrenched above the central bank’s 2 per cent target remains a bigger risk than tight Fed policy slowing the economy more than needed.
The relative outperformance of the US economy — with investors increasingly betting on a soft landing while growth in the euro zone and Britain stagnate — has buoyed the dollar against those currencies.