SYDNEY, Dec 15 — Asian markets stood still today as the world waited to hear from the US Federal Reserve on when it would stop buying assets and start raising interest rates, possibly piling pressure on its peers to follow.
Also vital will be the ultimate destination for rates given markets are currently priced for a peak of just 1.5-1.75 per cent, a level that would likely not even top inflation. Should Fed members agree and plot a much higher peak, it would challenge the lofty valuations of stocks and the slim yields offered by Treasuries. Right now, bonds are implying cash rates will average only 1.8 per cent for the next 30 years.
So many potential pitfalls kept investors nervous and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1 per cent in slow trade.Chinese blue chips were little moved as retail sales missed forecasts with a rise of 3.9 per cent while industrial output gained a firmer-than-expected 3.6 per cent.
Ten-year yields nudged up to 1.44 per cent, but remain well short of the recent top of 1.693 per cent. The yield curve continued its flattening trend as investors wager an earlier start to Fed tightening will lead to slower inflation in the long run.