U.S. Treasury yields remained steady on Thursday, holding the gains made across the curve following Wednesday’s spike, driven by a fresh wave of bond supply from a five-year note auction. Investors continue to grapple with the implications of rising yields, as the greenback held onto gains after a 0.7% jump in the previous session. The dollar index, which tracks the greenback against major currencies, edged lower but remained resilient as markets assessed the Federal Reserve’s capacity to engineer a soft landing for the U.S. economy critical for the outlook of global asset classes.
Yen Softens as Bank of Japan Maintains Cautious Stance
In currency markets, the yen hovered around 145 per dollar after dropping more than 1% on Wednesday. The Japanese currency has come under pressure amid growing signals that the Bank of Japan is in no hurry to raise interest rates further. Market sentiment remains cautious, as investors have overestimated the Fed’s pivot towards easing over the past three years. However, the central bank’s recent 50-basis-point cut highlighted its willingness to move quickly and adjust policy based on economic conditions rather than focusing solely on inflation. This shift has added nuance to the Fed’s response, with a more accommodative stance now on the table.
Oil Steadies After Slump, Gold Near Record as Rate Cut Expectations Build
In commodities, oil prices stabilized after a sharp decline in the previous session. West Texas Intermediate (WTI), the U.S. benchmark, tumbled more than 2% on Wednesday, settling below $70 a barrel. The pullback was driven by broader market volatility and concerns over global demand.
Meanwhile, gold remained steady, trading near its all-time high, supported by the weak U.S. economic data that strengthened the case for deeper interest rate cuts by the Federal Reserve. The precious metal continues to benefit from its safe-haven appeal, as investors position for potential dovish moves by central banks. With markets now increasingly expecting further rate cuts, gold’s allure remains intact, bolstered by lower U.S. bond yields and a softer dollar outlook.
As traders await the next signals from the Federal Reserve, the interplay between bond yields, the dollar, and broader commodities is expected to dictate near-term market movements.