US 2-year yields bid after Fed doubled the pace of tapering
16.12.2021, 03:05

US 2-year yields bid after Fed doubled the pace of tapering

  • Fed sends mixed signals around timings of lift-off with dots in contrast to Powell's presser.
  • US yields gyrate between 2-year bullish/10-year bearish.

The US Federal Reserve doubled the pace of tapering to $30bn per month, as was widely expected, which has a direct impact on the near-term US yields. 

The 2-year government bond yields rose from 0.65% to 0.66% while the 10-year government bond yields rose from 1.42% to 1.46%. However, we have seen a setback in the 10's during Asia which has risen to as far as 1.4820% but are now trading at 1.46% and lower by 0.14% on the day so far. 

While the ‘dot plot’ projected three 25bp rate hikes in 2022, compared to one previously and two expected by most, this is by no means a road map that is set in stone and the variables that can affect the path of tightening is weighing.

Fed's chairman, Jerome Powell, emphasised that all depends on not just the covid variant but economic data as well, hinting that there was no certainty of lift-off in 2022. This derailed the US dollar and sent US stocks higher.  The S&P 500 rose 1.6% to 4,709.85, the Nasdaq Composite was up 2.2% to 15,565.58 and the Dow Jones Industrial Average advanced 1.1% to 35,927.43.

US02Y daily chart

Nevertheless, the technical outlook for US 2-year yields remains firmly bid from a daily perspective while above 0.62%:

 

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