The US 10-year yield is above 1.85%, albeit slightly lower. It would still not be a surprise for the Fed to see 2.50% in terms of the level it will reach with 3 rate hikes in 2022. Just as important as the open-ended steering here is the argument that the Fed can move forward with a higher rate hike. As a matter of fact, if the market takes the rate hike by 50 basis points and the 25 basis points phenomenon is revealed in the January 26 guidance, we will wait for a short-term cooling.

In total, the fact that the Fed will use the balance sheet as well as the possibility of acting more aggressively (after all, it is likely to go beyond 4 rate hikes) will support the speculation aspect of the business. After all, all members are hawking while inflation is 7%. The yield spread is still in favor of the US, although the general direction of global bond yield movements is upwards. Other main country economies will pursue similar normalization policies, but both crisis reservations and hard landing risks are keeping them aloof from aggressive tightening.

The timing of the balance sheet reduction can be foreseen as the period of June – August. Depending on the situation, there is a possibility that the Fed will speed up the process. It will simultaneously reduce the balance sheet on the Treasury bills and MBS side.

Kaynak: Tera Yatırım
Hibya Haber Ajansı