Bond investors are adjusting their positions in response to Treasury Secretary-Designate Scott Bessent's confirmation hearing, where he expressed strong support for the dollar and a firm stance on spending and deficits. Bessent's pro-growth agenda, which includes extending tax cuts and boosting American energy production, has been well-received by the market, as it suggests a favorable economic outlook without immediate inflationary pressures. This has led to a shift in sentiment among bond traders, who are covering short positions and moving to long positions, particularly after the Consumer Price Index (CPI) rose less than expected, indicating potential for further bond price stability.
The anticipation of upcoming rate cuts, as noted by Governor Waller, has also contributed to the shift in bond market dynamics, with yields on 10-year Treasuries breaching critical technical levels. This has encouraged investors to flip from short to long positions, expecting yields to find support around 4.60%. As of 11:41 on January 16, the DXY is trading at 108.95, slightly down from its last close of 109.09, reflecting the nuanced market reactions to Bessent's statements and the broader economic indicators.