The U.S. Treasuries were little changed during a relatively quiet Wednesday session that saw little data of much significance. The yield on the benchmark 10-year Treasury note hovered around 2.56 percent mark and the yield on short-term 2-year note stood flat at 1.27 percent by 12:30 GMT.
Light trading will likely continue into next week as markets largely remain on autopilot. On balance, we expect Treasuries will continue to drift lower in the coming weeks as markets look to assess the relative strength of data as we move into 2017, something that could yield a slightly more aggressive Fed than was laid-out by the updated FOMC forecasts in December (already looking for 75 basis points of tightening over the course of the year).
Last week, the Federal Reserve Chair Janet Yellen commented that the United States is now seeing its strongest labour market in nearly a decade as job creation has continued at a relatively steady pace. Also added that she has seen signs of wage growth improving and that weekly earnings for younger workers are making strong gains.
The Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range on December 14, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.
Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.
Lastly, we foresee that Treasury prices will keep drifting between small gains and losses in quiet trading session. Also, trading activity will resume after New Year celebrations, probably from the second week of January, 2017 as global market receives no more important data till then.
Meanwhile, the S&P 500 Futures traded 6 points higher at 2,267 by 12:30 GMT. While at 13:00 GMT, the FxWirePro's Hourly Dollar Strength Index remained highly bullish at +120.80 (higher than +75 represents a bullish trend).
