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Risk-free rates ease, markets resilient

Goola Warden
Goola Warden11/24/2022 03:01 PM GMT+08  • 3 min read
Risk-free rates ease, markets resilient
Risk-free rates continue to ease as Fed rate hike cycle moderates, and markets firm
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It appears increasingly likely that yields on 10-year government bonds — be they US treasuries or Singapore Government Securities (SGS) — are in easing mode. The decline of the yield on 10-year SGS, which is currently at 3.055% as at Nov 24, looks more pronounced than that of yields on 10-year US treasuries. Yields on longer-dated SGS such as 30-year SGS have also fallen below 3%.

These trends are in the wake of a Bloomberg report stating that several US Federal Reserve officials backed the need to moderate the pace of rate hikes, citing the Fed’s Nov 1–2 meeting minutes. “Since the Fed’s latest meeting, investors have parsed a bevy of economic data that somewhat eased inflation concerns, further strengthening the case for smaller rate hikes,” Bloomberg reports. Some members are signalling they are leaning toward downshifting to a 50 bps hike in December,” Bloomberg adds.

The Federal Open Market Committee (FOMC) meets on Dec 13–14. “The FOMC minutes reveal a surprisingly strong dovish tendency on the committee and at the staff level. There is widespread agreement within the committee to slow the pace of rate hikes – a view championed by vice-chairwoman Lael Brainard, in our view — but little conviction on how high rates should go,” notes Anna Wong, chief US economist at Bloomberg.

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