- After seeing a positive trend in the first few days of the year, the market witnessed a huge sell-off on weak global cues.
- Markets were swayed by the US Federal Reserve Minutes commentary, which indicated interest rate hike will be sooner than expected and the central bank will stop economic stimulus measures.
- Investors shrugged off shares of banks, IT, metals, auto, infrastructure and bought some essential services stocks like pharma.
“Participants generally noted that, given their individual outlooks for the economy, the labour market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate," said the US Fed in the monetary policy minutes.
From the US Fed minutes commentary, markets have reportedly anticipated Fed to reduce its holdings of treasury bonds, which pushed the 10-year US Treasury yield to 1.7%.
The US Fed commentary to “reduce the size of the Federal Reserve's balance sheet” indicated that it will soon sell some of the bonds held in its account. This triggered the 10-year treasury bond yield, which went up to 1.7%
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