After last week U.S. Treasury decision to double its buyback sizes for long-term debt to put pressure on yields in the secondary money market, the markets participants became more anxiously waiting for Jackson Hole Economic Policy Symposium from Kansas to know whether or not there could be a direction to support the Treasury efforts to lower yields from the Fed which is facing relatively higher inflation upside risks comparing to the growth downside risks.

The Treasury’s decision could affect negatively on the yield of the long-term debt in the secondary money market boosting demand for risky assets, weighing down on the greenback which retreated against its rivals and also against Gold which could gain momentum to be traded above 4600$ per ounce as a higher trusted safe haven option than US Treasuries, While the focusing on the widening deficit of US and its creditability is rising again.
Now, the US Treasury is expected to fund its doubling buying decision of long-term debt by selling more short-term ones are basically more sensitive to the Fed’s decisions.
While the Fed is still facing inflation upside risks because of the tension in middle east which is also forming supply chains problems globally raising many products prices.
Watching inflation upside risk with inability to raise the interest rate enough or in time increases the demand for gold as a value store and hedge against inflation too.
The data from US have shown also recently looming growth downside risks, lower demand for jobs and generally lower demand drove the inflation over the producing and consuming levels down in July, as US Labor Report, CPI and PPI have shown.

It’s not easy for the Fed to take a direction next, while it becomes easier to watch the US economy falling in stagflation, with no foreseeable solution of the Iranian Hormuz Crisis.

The yields in the secondary money market have fallen generally by the end of the US session driving UST 10yr yield down below 4.62%, UST 30yr yield to 5.15% and also UST 2yr yield to 4.17%.
While Gold could be capable to hold its downside correction above 4600$, before bouncing up to be traded near 4660$ per ounce.

While the hopes are rising for coming actions or even at least comments from the Fed’s Governors to put more pressure on the UST yields by boosting demand for UST somehow to restore some lost confidence in them and in the greenback by God’s will.




Have a good day

 

Kind Regards
Global Market Strategist
Walid Salah El din