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US Dollar and Treasury Yields before the Fed’s Decision

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US dollar

After pulling back on December 12, the US Dollar Index is stable in the early hours on December 13. At 5:25 AM EST on December 13, the US Dollar Index is trading at 101.05—a gain of ~0.03%. The market is looking forward to the Fed’s meeting scheduled for December 14. The higher expectations of an interest rate hike support the dollar. Expectations of higher inflation and economic growth under Donald Trump’s presidency also strengthened the sentiment.

The focus will be more on the FOMC statement to find clues on the Fed’s stand about future interest rate hikes. The PowerShares DB US Dollar Bullish ETF (UUP) fell 0.57% to 26.09 on December 12.

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US Treasury yields

After a brief pull back on December 12, US Treasury yields are lower in the early hours on December 13. The Treasury yield curve became steeper since the US presidential election. The steeper yield curve indicates higher inflation expectations and strong economic growth. Optimism over Trump’s pro-growth policies and expectations of tax cuts moved Treasury yields higher.

At 5:45 AM EST on December 13:

  • The ten-year Treasury yield was trading at 2.5—a fall of ~0.83%.
  • The 30-year Treasury yield was trading at 3.1—a fall of ~1.4%.
  • The five-year Treasury yield was trading at 1.9—a fall of ~0.61%.
  • The two-year Treasury yield was trading at 1.1—a change of ~0%.

The iShares 20+ Year Treasury Bond ETF (TLT) gained 0.19%, while the ProShares UltraPro Short 20+ Year Treasury ETF (TTT) and the ProShares UltraShort 20+ Year Treasury ETF (TBT) fell 0.38% and 0.21%, respectively, on December 12.

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