US Treasury yields keep pullback from three-week top amid sluggish session

• US 10-year Treasury yields remain pressured after dropping from multi-day high.
• Stock futures struggle to remain positive, DXY tracks yields.
• US data, inflation expectations and Fedspeak probe bulls amid a light calendar.

Market players seem divided amid indecision on the Fed’s next moves, following the recently easing US data and inflation expectations, during early Thursday. Also challenging the sentiment is the light calendar and mixed macros of late.

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day on Wednesday, per the data source Reuters.

The same weighed on the US Treasury yields and US Dollar Index (DXY) but couldn’t help the equities. US 10-year Treasury yields stepped back from the highest levels since October 26 to post the heaviest daily fall in a week on Wednesday, down 1.3 basis points (bps) to 1.59% at the latest. Further, DXY tracked bond yields and marks a first negative daily closing in three after refreshing the 16-month top, indecisive around 95.80 by the press time.

It’s worth noting that news that China’s Evergrande is up for selling 1.662 billion shares in Hengten Networks at HK$1.28 joins the US optimism over the supply chain issues to keep buyers hopeful. Also on the positive side is the recently subdued US housing market data.

However, US-China tussles and the Fedspeak chatters remain on the table to weigh on the risk appetite and hence restrict S&P 500 Futures from making gains around 4.690. It’s worth observing that Japan backs the US to stop China from taking more control of Taiwan whereas the Dragon nation has indirectly warned America to not interfere in the issues. Furthermore, Recently, Charles L. Evans, the Chief Executive Officer of the Federal Reserve Bank of Chicago said, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.”

Given the mixed concerns and a lack of major data/events, weekly prints of the US Jobless Claims, expected to ease from 267K to 260K, will join the Philadelphia Fed Manufacturing Survey for November, likely 24 versus 23.8 prior, to entertain traders.

Above all, Fedspeak and inflation chatters will be important to watch for a clearer direction.

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