Rates: Time to shake things up

Between the two, my heart sways. Clearly, this could be the current mantra of investors, who have never been so undecided about the next steps in US monetary policy. It has to be said that Jerome Powell's latest outing didn't exactly reassure them, but is that a valid reason?

According to the latest statistics provided by the CME's Fedwatch tool, investors are divided into two well-balanced clans, as shown in the chart below. At a time when everything seemed scripted, the Fed cooled expectations somewhat due to the US economic situation, while making it clear that there was no urgency to cut rates again.

Since then, things have stalled, with equity markets weakening and interest rates stagnating. All is not lost, however, as since our last analysis, the 10-year yield has not only touched/jumped over the resistance zone at 4.46/55% resistance zone, but the new bearish divergences on the countercyclical indicators now point to a consolidation, or even, let's be crazy, a resumption of the bearish momentum in place for the past year. In concrete terms, the break of the 20-day moving average is already a good precursor of consolidation towards 3.94%, even if the more cautious will wait for the break of 4.28% to play the downside.

Source : Bloomberg