Industrial Forex: "Anchor of Global Asset Pricing" The sword pointed to last year's high, and the "eagle" soul of the Federal Reserve was hard to disperse!

Although more and more people on Wall Street believe that the Federal Reserve may not raise interest rates again, that doesn't mean the turmoil in the bond market will soon be a thing of the past.

Investors expect U.S. Treasuries to continue to be affected by increased volatility asThe economic uncertainty could change the Federal Reserve's policy path or allow it to keep interest rates at higher levels for much longer than traders currently expect.

Some Federal Reserve officials have stressed that despite the most aggressive monetary policy tightening in 40 years, inflation is above the 2% target, which means they may have more work to do.

Strategist at BarclaysClients are advised to sell two-year US Treasury bonds.They expectInterest rates will remain high next yearThis runs counter to market expectations that the Federal Reserve will start cutting interest rates as soon as March next year.Yields on 10-year Treasuries, the "anchor of global asset pricing", are rising back to last year's highs.

Rob Waldner, chief fixed income strategist at Invesco, said "the rise in long-term Treasury yields has been driven by a hawkish message from the Fed. The Fed remains hawkish, which has led to a high level of uncertainty".

That uncertainty, combined with the federal government issuing new debt in response to growing deficits, has weighed on bond markets.Even with a sharp rise in interest rates, the overall Treasury market has returned just 0.1% this year, according to Bloomberg Indices, well below the gains expected towards the end of the Federal Reserve's rate hike.

Swap market shows Fed will cut rates by more than 100 basis points next year

After the Fed raised overnight rates by 25 basis points at its July policy meeting, Powell stressed that decisions at the September meeting would depend on data released in the next two months.

So far, the main data have generally shown signs of slowing job growth and moderating inflation, supporting speculation that interest rates would remain unchanged in September. But the core consumer price index, which strips out volatile food and energy prices and is seen as a better gauge of underlying inflationary pressures, still rose at an annual rate of 4.7 per cent in July. Producer prices also rose faster than expected on Friday, pushing up yields across maturities.

In the coming week, traders will look to the Fed's July meeting notes for clues about policymakers' views on the direction of interest rates and any divergent views among them.

The annual meeting of global central bankers in Jackson Hole, Wyoming, later this month will also be closely watched.This could provide Powell with an opportunity to overturn market pricing.Markets expect the Federal Reserve to cut its key interest rate to around 4% by January 2025.

Subadra Rajappa, head of U.S. interest rate strategy at Socie ́ te ́ Ge ́ ne ́ rale, said: "There are divisions within the committee. And the market pricing shows a lack of investor confidence. The theme of the current Fed interest rate cycle is still'higher, longer '."

Bloomberg economist Anna Wong said,"The July meeting notes released this week will show that most Fed officials are encouraged by progress on disinflation but are not yet convinced that the rate hike cycle is over."

Even so, some investors have piled into the Treasury market amid rising interest rates and fears that this year's equity rally will prove unsustainable, which Bank of America strategists say will lead to record inflows this year.

However, Kerrie Debs, a registered financial planner at Main Street Financial Solutions, has been warning clients that while the rally in the stock market may not last, it may not be sustainableBonds are not a foolproof safe haven”。

Mr. Debs, who has 50 clients and manages total assets of about $70 million, said "there are still a number of events that could hinder these positive market returns, including persistent inflation, perceptions of the credit quality of US government debt, surging US budget deficits and global political instability".