Dollar Weakens, Oil Slumps, Dragging US Bond Yields Sharply Lower as Investors Boost Bets on Fed Holding Rates

InfoQuest··US·Read original
4▲0 ▼4Impact / 5
Summary · why it matters

The dollar index fell 0.28% to 101.88 and was on track for its largest daily decline since September 25. As of 11:34 p.m. Thailand time, the dollar was down 0.30% at 1.126 against the euro and up 0.16% at 158.15 yen. The dollar's weakness came in line with US government bond yields pulling back from multi-decade highs after crude oil prices in global markets tumbled, with Brent crude falling below 99 dollars per barrel and West Texas crude dropping below 89 dollars per barrel. The declines followed reports of increased oil exports from the Middle East as well as releases of oil from strategic reserves by the G7 group. The yield on the 30-year US Treasury note fell to 5.625% after earlier surging to its highest level since May 2002, while the 10-year yield dropped to 5.256% after hitting its highest since April 2002 on Monday, and the 2-year yield declined to 4.787%. Investors increased their bets that the Federal Reserve will hold interest rates steady at its October meeting after the US Institute for Supply Management reported that its services index fell to 54.9 in September, below analysts' forecast of 55.2 and down from 55.4 in August. The latest CME Group FedWatch Tool indicated that investors now assign a 78.4% probability to the Fed holding rates at 3.75-4.00% at its October meeting, up from just 29.1% a week earlier, and a 21.6% probability to a 0.25% rate hike to 4.00-4.25%, down from as much as 70.9% a week earlier. Meanwhile, investors are watching for the minutes of the Fed's September monetary policy meeting, due for release on Wednesday, as well as remarks from Fed Chairman Kevin Warsh, who will attend the IMF-World Bank Annual Meetings 2026 in Bangkok from October 12-18. Warsh is scheduled to appear on stage with International Monetary Fund Managing Director Kristalina Georgieva on Friday, October 16, from 10:30 to 11:00 a.m. in a session titled "Managing Director's Fireside Chat with Federal Reserve Chairman Kevin Warsh." The appearance is considered significant because October 17 marks the start of the Fed's blackout period on public comments about monetary policy ahead of the FOMC meeting on October 27-28.

Impact on assets 4

Others▼
％Effective Federal Funds Rate
EFFR
▼ NegativeMonetaryrelevance

Investors boosted bets the Fed will hold rates steady at the October meeting, implying no hike and a lower expected policy rate path.

％US Government Bond 2Y
US-2Y
▼ NegativeMonetaryrelevance

2-year Treasury yield declined to 4.787% on increased expectations the Fed holds rates steady.