Post Election Bond Sell Off Continues, USD Surges

Post Election Bond Sell Off Continues, USD Surges

Post Election Bond Sell Off Continues, USD Surges


Commentary: The US Dollar (.DXY) Index is up 0.26% to 100.48 today as the probability for a vote to hike rates at the 13-14 December FOMC meeting moved to a near certainty. Higher policy rates at the Fed should encourage capital to flow into the US. PE

The USD hit a 13-year high Vs a basket of currencies Wednesday, as a post-US election sell-off resumed across global bond markets, lifting Treasury yields and attracting investors to the US currency.

The Bank for International Settlements this week repeated its view that a stronger USD poses risks for global markets and financial stability. Investors have largely shrugged off these warnings but stocks felt the heat of the USD’s latest rise on Wednesday.

The world’s interest rates have been dragged higher by the US yield curve, creating the risk that interest rates may be too high for the fragile economies in Europe and EMs (emerging markets).

US President Elect Donald Trump’s plans to cut taxes and boost infrastructure spending would boost economic activity while his proposals to deport illegal immigrants and impose tariffs on cheap imports are seen driving inflation higher.

That prospect has given rise to expectations that US interest rates will rise faster than previously anticipated, boosting the USD.

The dollar index, a measure of its value against a basket of currencies, rose to 100.53 on Wednesday, its highest since April 2003.

Benchmark 10-year US Treasury yields rose 5 bpts to 2.29%, edging back up toward Monday’s 11-month high of 2.302% and up from around 1.86% just before the election.

US interest rate futures are pricing in around a 90% chance of a rate hike in December, compared to 75% before the election.

St. Louis Fed President James Bullard told a conference in London Wednesday that it would need a surprise for the Fed not to raise rates next month. The only reason to hold off would be the kind of big shocks that caused it to pull back in the past, such as widespread global market volatility or bad US jobs data, he said.

Wednesday, the US major stock market indexes finished at: DJIA -54.92 at 18868.14, NAS Comp +18.96 at 5294.58, S&P 500-3.45 at 2176.94

Volume: Trade was heavy with over 1.8-B/shares exchanged on the NYSE.

  • Russell 2000 +14.6% YTD
  • DJIA +8.3% YTD
  • S&P 500 +6.5% YTD
  • NAS Comp +5.7% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.44) Bullish (0.33) Very Bullish (0.61) Bullish (0.36)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.28) Neutral (0.21) Bullish (0.31) Bullish (0.33)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.07) Neutral (-0.07) Bullish (0.25) Neutral (0.04)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.35) Bearish (-0.35) Bearish (-0.33) Bearish (-0.38)

Stay tuned…


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