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2025-12-11 21:29:33
[Fed Storm Overshadows Hidden Worries; Oil Prices Falling Below $55 Could Initiate a Halving] ⑴ The surge in Treasury yields triggered by the Fed's rate cuts continued, with the 10-year Treasury yield falling as low as 4.118% in London trading, steepening the yield curve. The market is pricing in the possibility of further rate cuts in the first half of 2026. ⑵ Analysts point out that the current federal funds rate is already at the high end of the Fed's neutral rate forecast range. Future policy will depend on data, and the Fed Chairman has ruled out the possibility of rate hikes and expressed concern about further weakness in the labor market. ⑶ Amid the political storm surrounding the Fed, the weakness in oil prices has been overlooked by the market. If crude oil prices fall below the $55 mark, it could trigger a sell-off towards $50 and lower levels. ⑷ Some institutions predict that oil prices will trade within a wide range of $30 to $60 in the coming years. If large leveraged funds collectively establish short positions, it could push oil prices even lower. (5) Commodity trader Trafigura believes the oil market is facing a "super surplus," and the commissioning of new drilling projects and slowing demand growth will further suppress already low oil prices next year. His trading director predicts Brent crude will enter the $50 range. (6) This means West Texas Intermediate (WTI) crude prices could fall to the $40 range. The structural decline in oil prices will create a favorable environment for the economy by reducing inflation, potentially leading to lower interest rates and mortgage rates. (7) On Thursday, the market will focus on weekly initial jobless claims data, which previously fell sharply to 191,000, the lowest point in more than three years, continuing the labor market narrative of low hiring and low layoffs. (8) Although lagging, September's international trade data is more closely watched than usual due to recent tariff-related fluctuations, with exports stagnating and imports declining sharply after surging at the beginning of the year. (9) The U.S. Treasury will conduct several bond issuance and repurchase operations on Thursday, including an auction of $22 billion in 30-year Treasury bonds. The market's technical preference is to go long when the 10-year yield is at 4.19% and to sell near 4.08%.
