Short-term bond yields at fourteen-year highs ahead of Fed’s meeting
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Short-term bond yields at fourteen-year highs ahead of Fed’s meeting

For the first time since November 2007, the two-year US Treasury yield climbed as high as 3.970% overnight. A 10-year yield of 3.518% reached a high not seen since April 2011.

Investors around the world are focusing on the US Federal Reserve's two-day monetary policy meeting, starting Tuesday. A 75-basis-point rise in interest rates is expected by the markets as the central bank seeks to put a lid on soaring prices by raising interest rates.

European market heading for a cautiously green day

Tuesday is expected to see European stock markets open marginally higher, following the global trend upward, although sentiment remains fragile ahead of the Federal Reserve's two-day meeting.

US benchmark averages finished higher on Monday after recovering from nine-week lows. As investors attempt to stage a recovery from last week's selloff of European stocks, this positive tone has continued in Asian trading, and it is expected to boost European stocks moving forward.

Nevertheless, investors are likely to remain cautious before the start of the Fed's latest meeting, which is widely expected to result in another 75-basis point rate hike following last week's higher-than-expected consumer inflation report.

In Europe, it is a quiet day for economic data, although German producer prices jumped 7.9% the month in August, an astounding 45.8% increase on an annual basis.

Oil prices steady

Oil prices steadied on Tuesday after rising on Monday on fears that further US interest rate increases this week will stunt economic growth and impact fuel demand. On the other hand, the dollar showed little movement on Tuesday as it remained firm below a two-decade high in relation to major peers, ahead of several central bank meetings around the world this week led by the US Federal Reserve. Moreover, since the greenback is stronger, dollar-denominated oil is more expensive for buyers using other currencies, and the expected rate increases have raised concerns about a global recession.

US Energy Department has announced that it will sell up to 10 million barrels of crude oil from the Strategic Petroleum Reserve for delivery in November. This will result in an extension of the date on which 180 million barrels from the stockpile will be sold to temper the price of crude oil.

A few signs that major producers are not meeting their production quotas have helped to support prices to some extent. A document from the Organization of Petroleum Exporting Countries and its allies led by Russia, known as OPEC+, indicated that the group has fallen short of its oil production target by 3.583 million barrels per day (bpd) in August, according to the document. The group missed its target by 2.892 million barrels per day (bpd) in July.

Gold prices ease

As the US dollar edged lower on Tuesday, the pressure on gold eased slightly. However, the greenback remains near 20-year highs while US Treasury yields rise ahead of the Fed's decision to hike rates. 

Due to a series of Fed rate hikes, gold has fallen since the onset of the Russia-Ukraine war, trading lower for the year. A recent dip below $1680 was seen as one of the last points of support before a steeper decline. Currently, the price is struggling with $1660 support, which may be the last hope for buyers.