Core Insights - The U.S. dollar remains stable as investors await the Federal Reserve's policy announcement and Chair Jerome Powell's comments [1] Group 1: Federal Reserve Rate Expectations - A 25-basis-point rate cut is anticipated with nearly 90% probability, with expectations for two additional cuts next year [2] - Speculation suggests the Fed may adopt a cautious stance regarding further rate cuts, which could negatively impact the U.S. dollar and Treasury yields [2] Group 2: Market Reactions - Any indication from Powell that the Committee is leaning towards a more dovish policy could lead to a decline in both the dollar and long-term yields [3]

Core Viewpoint - Treasury yields are increasing, raising concerns that anticipated interest-rate cuts from the Federal Reserve may not lead to lower borrowing costs as hoped [1] Group 1 - The rise in Treasury yields is causing anxiety among investors [1] - There is a growing sentiment that the Federal Reserve's potential interest-rate cuts may not materialize as expected [1]

Core Viewpoint - U.S. stock futures suggest that the selloff observed on Monday is likely to persist, indicating a bearish sentiment in the market [1] Group 1: Market Trends - The dollar, gold, and bitcoin have all experienced declines, reflecting a shift in investor sentiment towards safer assets [1] - Treasury yields have also decreased, further indicating a flight to safety among investors [1]

Economic Sentiment - The University of Michigan Consumer Sentiment Survey reported a score of 49, indicating a decline in consumer confidence, particularly regarding the government shutdown, inflation, and job security [2][4] - There is a noted discrepancy between soft data, like consumer sentiment, and hard data, suggesting a continuing pattern of economic uncertainty [3][5] Treasury Yields - Treasury yields are expected to remain rangebound due to a lack of hard data, with the government shutdown preventing the release of key employment reports [5][6] - Global yields remain elevated, which is likely to influence capital flows and keep U.S. yields high [7] - The term premium, reflecting investor compensation for market uncertainty, is also expected to remain elevated, contributing to sustained higher long-term yields [8][9] Municipal Bonds - Recent months have shown positive returns in the municipal bond market, although they still lag behind corporate and treasury markets [10][11] - Municipal bonds are considered an attractive investment option for higher tax bracket investors, especially given their relative valuations compared to corporate bonds [11][12] - The yield on municipal bonds is appealing, with a tax rate of about 24% needed for corporate bond yields after taxes to match municipal yields, which is historically low [12][13]

Falling oil prices may drive benchmark Treasury yields back to levels last seen more than a year ago, according to Wall Street research veteran Ed Yardeni https://t.co/oseFV8cySR ...

Group 1 - The dollar weakened by 0.2% on Monday, marking a second consecutive day of decline, influenced by the risk of a US government shutdown and uncertainties surrounding upcoming economic data releases [2][3] - The two-year Treasury yield decreased by 2 basis points to 3.62%, down from a high of 3.67% on Friday, as investors await the latest payrolls reading to gauge the likelihood of further Federal Reserve rate cuts [5][6] - Fed Chair Jerome Powell indicated challenges ahead for policymakers due to risks in the labor market and inflation, leading to a pullback in expectations for policy easing, with swaps suggesting an 80% chance of a rate cut next month [6] Group 2 - The dollar experienced its most significant decline against the yen, dropping as much as 0.7% to 148.47, amid speculation of a potential interest rate hike by the Bank of Japan [7] - Comments from a dovish Bank of Japan board member highlighted the increasing need for an interest rate rise, which could further strengthen the yen if the ruling party selects a leader favoring monetary tightening [7]