Market outlook

US$ yields are rising because of growing currency risk, triggered by the Fed’s interest rate policy which is abandoning attempts to control inflation in favour of reflation.

When the Fed cut its funds rate on Wednesday, the yield on the 10-year Treasury note fell to 4% before quickly reversing higher. This is shown in the chart below, with the pecked line illustrating the moment of the Fed’s announcement.

The other market reaction which was notable was gold:

Gold was marked down over $55 by early afternoon the following day, before recovering almost all of it by Friday’s close. Notably, silver (not shown) rallied into new multiyear high territory.

What does it all mean?