Market Wrap: Short-end US interest rates rose ahead of this week’s FOMC meeting

Analysts from Westpac offered a market wrap, highlighting the risk-averse tone seen on the S&P moves. 

Key quotes:

"Global market sentiment: A slightly risk averse tone saw the S&P500 shedding 0.5%. Oil fell over 2% on increased drilling. Short-end US interest rates rose ahead of this week’s FOMC meeting.

Interest rates: The short end of the US curve moved most, 2yr treasury yields rising from 0.71% to 0.74% - a one-month high. Concerns the Fed may hint this week that September is live may have been at play. The 2yr auction fared poorly: 1bp above pre-auction yield, a 2.5 bid-cover ratio (vs 3.0 average), and low offshore participation. Market pricing of the Fed funds rate firmed slightly, implying a 30% chance of a rate hike in September, a 60% chance by December, and 100% by Aug 2017. 10yr yields ranged sideways between 1.55% and 1.59%.

Currencies:  The US dollar index pulled back from a four-month high. EUR rose from 1.0965 to 1.0999. USD/JPY slipped from 106.42 to 105.75, making the safe-haven yen the best performer on the day. The Nikkei newspaper reported fiscal spending would be JPY6tr – double the planned amount. AUD initially rose to 0.7492 but then slipped to 0.7455. NZD ranged between 0.6975 and 0.7000. AUD/NZD fell from 1.0728 to 1.0675."