There are strong indications in the market that the Fed may cut another 75 basis points in the interest rates, or 0.75%. The bond prices in the US are going down because of this speculation, and there are expectations that the Fed will definitely have to go for a massive rate cut.
This speculation about the interest rate cut follows from the recent development of dollar yen exchange rate falling to record bottoms for the dollar in the past many years.
Previously also, the Fed had gone for massive rate cuts, but the turmoil seems to continue for the US economy.
What is more dangerous for the other emerging economies of the world is that the export dependent countries like India and China also face the dangers of being eroded away. The interest rate differential between India and US is already well above 5% or 500 basis points, and yet another rate cut of 75 basis points will make it an interesting scenario.
As per the news, the U.S. Treasuries fell for a second day on growing speculation the Federal Reserve will lower interest rates by 0.75 percentage point this month.
| Two-year notes led the declines, with the yield difference between the shortest-dated debt and 10-year notes at 190 basis points, still near the widest in more than 3 1/2 years. Traders raised bets on rate cuts on speculation policy makers are more concerned about reviving economic growth than curbing inflation. | Table of Contents |
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