Treasury refunding could overshadow FOMC decision

By Han Tan, Chief Market Analyst at Exinity Group

The FOMC is widely expected to leave its benchmark rates untouched on Wednesday, with Chairman Jerome Powell set to echo the “higher for longer” mantra.

The Fed Chair may have little to offer markets in terms of fresh signals, instead likely reiterating policymakers’ “data dependent” approach.

However, greater market volatility may stem from the US Treasury’s quarterly refunding announcement.

After all, the previous notice in early August set 10-year Treasury yields on a path towards eventually breaching 5% for the first time since 2007. This prompted the S&P 500’s about-turn before eventually entering a brief technical correction last week.

If markets are unable to stomach the Treasury’s latest borrowing plans, that may trigger another leg up for US yields and boost the dollar, while heaping more pain on stocks.

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Exinity ME Ltd, a company registered under the Laws of the Abu Dhabi Global Market (ADGM), is authorised and regulated by the Financial Services Regulatory Authority (FSRA)