The news this week has been interesting as the Fed reactions to mid-term elections, and markets adjust to the Fed’s stance on the plan to raise rates at a steady rate. Gold and other commodities are being affected by the Fed’s positions.
Our last article this month is very interesting. Australia is enjoying a 27-year run without a recession. The Fed is looking at the steps they’ve taken to put the US in position for sustaining our current run.
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Treasury yields fall after election results come in as expected; Fed kicks off two-day meeting (source)
- Treasury yields fell on Wednesday after the US midterm elections resulted in the Democrats winning the House of Representatives and Republicans retaining the Senate.
- Some bond traders said a split in Congress could stall plans for further tax cuts or major spending.
- The benchmark 10-year Treasury note fell to around 3.199%, while the yield on the 30-year bond dropped to 3.403% as of 11/07/18.
- Meanwhile the yield on the 2-year note rose to around 2.944%; this is its highest level since 2008.
- The Fed’s policymaking arm gathered on Wednesday 11/07/2018 for the first session of a 2-day meeting.
- Concerns around the pace of interest rate hikes led to a roller-coaster ride for global markets last month.
- Should the Central Bank choose to tweak its policy in November, it’s likely it will move to increase the rate paid by the Fed for excess reserves.
US Federal Reserve Keeps Interest Rates Unchanged (source)
- US Federal Reserve held interest rates steady on Nov. 8th, but remained on track to keep gradually tightening borrowing costs.
- “The labor market has continued to strengthen, and economic activity has been rising at a strong rate,” the US central bank said, leaving intact plans to continue raising rates at a gradual pace.
Gold falls to 1-month low as Fed affirms rate-hiking stance (source)
- Gold fell to its lowest in a month on Friday as the US dollar strengthened after the Federal Reserve reaffirmed its monetary tightening stance.
- It’s widely expected to raise interest rates in December, which would be its fourth hike this year, as it pointed to a healthy economy.
- Spot gold was down 1.9% at $1,208.91 per ounce, having touched its lowest since Oct. 11th at $1,206.72. It was on track to end the week more than 2% lower; the steepest weekly decline since the week of Aug. 17th.
- US gold futures settled down 16.5% to $1,208.60 per ounce.
- Also weighing on overall commodity market sentiment, was a decline in oil prices, with benchmark Brent crude falling to its lowest since early April.
- “Gold is re-establishing its relationship with the crude oil market,” said the VP of Heraues Metal Management in New York.
- Silver dropped about 1.73% to $14.16 per ounce, touching its lowest since September 18th.
- Platinum shed 1.72% to $849.25 an ounce.
Fed Eyes Australia in Search for Holy Grail of Economic Growth (source)
- Federal Reserve officials are looking to Australia’s record run of economic growth for hope that a US recession may not be inevitable.
- While the Australian economy has entered its 27th year of expansion, it’s been assisted by a commodities boom, the worlds biggest immigration program, a run up in household debt and a particularly stringent definition of what constitutes a recession.
- “Australia shows there is no cosmological constant that says expansions must cease after a certain number of years. While the US may not have the same shock absorbers as Australia, with enough finesse and some luck, there is no necessity the US will have a recession in the next few years.” – Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York.
- With the Australian dollar down more than 10% from its January high, their central bank has kept interest rates at a record low while the Fed tightens.
- Having avoided a slump for a generation, more Australians haven’t had to tighten their belts since the early 1990s, meaning household debt levels are now among the world’s highest.