The yield on the 10-Year U.S. Treasury note climbed to a two-week peak of 4.1% on Friday, as the market assessed the Federal Reserve's potential interest rate trajectory for the coming year. The latest Michigan consumer confidence index displayed a recovery in consumer sentiment in December, alleviating some worries that elevated living costs and stagnant hiring could constrain consumer spending. This development stands in contrast to recent labor market reports indicating a significant slowdown in hiring activities, adding uncertainty regarding the extent to which the Federal Reserve might ease monetary policy in the future.
As President Trump prepares to appoint a new Federal Reserve Chair who may align with his preference for dovish policy, feedback gathered by the Treasury indicates that market participants are apprehensive about the possibility of the new Chair implementing excessive rate cuts to appease the President. Nevertheless, rate futures suggest a tentative agreement on a 25 basis point rate cut anticipated next week, a consensus further solidified by the absence of unexpected price hikes in the delayed release of September’s Personal Consumption Expenditures (PCE) price indices.
