Treasury Yield Curve Inversion Deepens
INTEREST RATE MARKET FUTURES
Spread between 2-year and 10-year Treasury yields is inverted by over 80 basis points, the most in 41 years, which has recessionary implications.
There are no Federal Reserve speakers today with the Fed’s self-imposed blackout period in force ahead of next week’s Federal Open Market Committee meeting.
According to financial futures markets currently, there is a 77.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 policy meeting and a 23.0% probability that the rate will be hiked by 75 basis points.
The fundamental and technical aspects have turned more supportive for futures.
STOCK INDEX FUTURES
Stock index futures are lower after warnings of a looming recession from major Wall Street bankers.
The 2:00 central time October consumer credit report is expected to show a $27.3 billion increase.
In spite of lower prices today, the fundamentals and technicals for stock index futures remain supportive.
The U.S. dollar index is lower and remains near the lowest level since late June.
Interest rate differential expectations are long-term bearish for the greenback, and lower prices are likely.
The euro currency is higher on news that euro zone quarterly economic growth was revised slightly higher to 0.3% in the third quarter of 2022 from preliminary estimates of 0.2%, and following a 0.8% expansion in the previous three-month period.
German industrial production fell less than expected in October. Industrial output was down 0.1% from the previous month. Analysts anticipated a 0.6% decrease.
U.K. house prices fell at the fastest pace in 14 years in November after interest rates surged, reducing the affordability of properties.
The Bank of Canada will likely hike its key interest rate by 25 or 50 basis points at the conclusion of its policy meeting later today.
Australia’s economy slowed a little in the September. Real gross domestic product increased 0.6% in the third quarter, compared with 0.9% the previous quarter and just under forecasts of 0.7%.
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