Financial markets experienced a wave of risk aversion on Tuesday, resulting in the appreciation of the US Dollar against most major currencies. The price of XAU/USD dropped to $1,815.19, reaching its lowest level since early March. This decline can be attributed to concerns among investors regarding potential interest rate hikes in the United States.
On one hand, various officials from the Federal Reserve (Fed) expressed their belief that inflation levels remain too high and emphasized the necessity for at least one more rate hike in order to maintain control over price pressures. Furthermore, these officials reiterated their stance that interest rates should remain elevated for an extended period of time. On the other hand, data released by the United States Bureau of Labor Statistics (BLS) revealed that job openings on the last business day of August totaled 9.6 million – significantly higher than expectations which were set at 8.8 million – indicating a tight labor market.
These developments led to a surge in government bond yields while stock markets suffered significant declines, reflecting renewed fears among market participants. The yield on 10-year Treasury notes surged to as much as 4.79%, marking its highest level in over sixteen years; meanwhile, two-year notes provided an interest rate of 5.13%.
On one hand, various officials from the Federal Reserve (Fed) expressed their belief that inflation levels remain too high and emphasized the necessity for at least one more rate hike in order to maintain control over price pressures. Furthermore, these officials reiterated their stance that interest rates should remain elevated for an extended period of time. On the other hand, data released by the United States Bureau of Labor Statistics (BLS) revealed that job openings on the last business day of August totaled 9.6 million – significantly higher than expectations which were set at 8.8 million – indicating a tight labor market.
These developments led to a surge in government bond yields while stock markets suffered significant declines, reflecting renewed fears among market participants. The yield on 10-year Treasury notes surged to as much as 4.79%, marking its highest level in over sixteen years; meanwhile, two-year notes provided an interest rate of 5.13%.
🔴Currently, the yield curve is sloping at a historically high rate.