Monday saw an increase in U.S. Treasury yields as investors absorbed remarks from Federal Reserve Chair Jerome Powell.
The yield on the benchmark 10-year Treasury note increased by more than 7 basis points to 3.108%, while the yield on the benchmark 30-year Treasury bond increased by almost 3 basis points to 3.239%.
The yield on 2-year Treasury notes was around 5 basis points higher, trading at approximately 3.446%. The relationship between yields and prices is inverse, and a basis point equals 0.01%.
It follows Powell’s annual policy address in Jackson Hole, Wyoming, on Friday.
Powell stated that the U.S. central bank will “use its instruments aggressively” to combat inflation, which is around its highest level in over four decades. He recognized that higher interest rates will cause individuals and companies “some discomfort.”
Monday morning, Dow Jones futures, S&P 500 futures, and Nasdaq futures all declined significantly. The stock market rise experienced big weekly losses again last week, with Federal Reserve head Jerome Powell stating on Friday that further “pain” is required to curb inflation.
As the market continues to decline, investors should be wary about expanding exposure. They may need to take a step back if they have been overexposed or purchased extended stocks in the past few days.
However, the current “pain” for the market surge may be paving the way for large profits, albeit the timing is uncertain. A handful of equities are establishing handles, while others are constructing bases or may be on the verge of positive pullbacks.
After Powell’s speech on Friday, the dollar surged on Monday, momentarily touching 20-year highs versus a basket of other currencies.
The dollar index, which measures the dollar’s value relative to a basket of other currencies, reached a new 20-year high of 109.48 before retreating somewhat as the European session carried on.
It remained around 0.5% stronger versus the Japanese yen, while China’s yuan surpassed the critical benchmark of 6.9 per dollar and the British pound hit a new 2-and-a-half-year low.
The euro regained some ground and was recently up 0.3% at $0.9993, as hawkish comments from the European Central Bank boosted expectations for a massive September rate rise.
