25 Feb 2015
Market reaction to Yellen’s clarity – Rabobank
FXStreet (Barcelona) - The Rabobank Team comments on the market reaction post Yellen’s testimony, noting that US 10-year yields headed below 2.0% and equities managed to rise slightly post the speech.
Key Quotes
“The press certainly agreed with the FT noting “Fed Paves Way to Raise Rates This Year”; the WSJ “Yellen Puts Fed on Path to Lift Rates”; and Bloomberg going with “Fed Signals Fed’s Patience with Zero Interest Rates Has Limits”. (Meanwhile, the UK’s Daily Mail bravely opts for “Is this Spooky Apparition the Grey Lady of Hampton Court?”)”
“So what was the market reaction to Yellen’s clarity? Not what one would expect, perhaps. 10-year US yields headed straight back below 2.0% for the first time since 2 February, and 2-year yields from 0.64% to 0.56%; US equities managed to rise slightly despite the threat of the punchbowl being diluted; and the DXY dollar index spiked but then ended lower.”
“Was the market listening to Yellen’s message backwards, … Or perhaps the bond market and USD were listening to US consumer confidence, which was singularly out of tune, falling to 96.4 from 103.8, as Yellen speaking.”
“Also of note was her view that ‘Currency wars? I see no currency wars!’ – which arguably will only drag us deeper into them. After all, the first step to solving a problem is recognising it exists.”
Key Quotes
“The press certainly agreed with the FT noting “Fed Paves Way to Raise Rates This Year”; the WSJ “Yellen Puts Fed on Path to Lift Rates”; and Bloomberg going with “Fed Signals Fed’s Patience with Zero Interest Rates Has Limits”. (Meanwhile, the UK’s Daily Mail bravely opts for “Is this Spooky Apparition the Grey Lady of Hampton Court?”)”
“So what was the market reaction to Yellen’s clarity? Not what one would expect, perhaps. 10-year US yields headed straight back below 2.0% for the first time since 2 February, and 2-year yields from 0.64% to 0.56%; US equities managed to rise slightly despite the threat of the punchbowl being diluted; and the DXY dollar index spiked but then ended lower.”
“Was the market listening to Yellen’s message backwards, … Or perhaps the bond market and USD were listening to US consumer confidence, which was singularly out of tune, falling to 96.4 from 103.8, as Yellen speaking.”
“Also of note was her view that ‘Currency wars? I see no currency wars!’ – which arguably will only drag us deeper into them. After all, the first step to solving a problem is recognising it exists.”