Daily Market Color December 31, 2024Longer-Term Yields Rise to End 2024 Yield curve steepens in 2024’s last session. The long end of the yield curve rose ~4 bps today while the short end was nearly flat. The yield curve extended its steepest levels since June 2022, with the 10-year yield (4.57%) now 32 bps above the 2-year yield (4.24%). Meanwhile, the Bloomberg Dollar Spot Index rose 0.38% today to extend its highest level (1,310) since October 2022, closing the year up 8%. Markets will be closed all-day tomorrow, and U.S. manufacturing data will commence 2025’s slate on Thursday and Friday. 2024 Fed review. Entering 2024, markets were enthusiastic about progress on inflation and expected a cut in March to head-off 150 bps of total rate cuts through year-end. As the year developed, inflation and economic strength proved resilient. In turn, markets tempered cutting expectations, and zero 2024 rate cuts became a realistic possibility. The tables turned again after July’s weak labor market data spurred recession concerns, and the Fed kicked off the easing cycle with a 50 bp rate reduction in September followed by additional 25 bp cuts in November and December. Looking ahead, The Fed surprised markets with higher-than-expected rate forecasts for 2025 at December’s policy meeting, with the median projection indicating just 50 bps of rate cuts by year-end. Get ready for the New Year’s Eve festivities (at-home). It’s that time of year again, and if you’re planning on celebrating the new year at home, you’re in good company. According to a poll by the Associated Press and the National Opinion Research Center, only 5% of respondents said they plan to celebrate at a bar, restaurant or organized event, while 72% said they plan to stay at home. The tradition of New Year’s resolutions remains alive and well; 57% of respondents said they plan to make at least one resolution, with the most popular categories involving health and finances. After the celebrations, 42% of respondents expect 2025 will be better for them personally than 2024, and 35% said they expect the country to be better off during the year. The Derivative Path team wishes all a happy and healthy celebration, and we look forward to speaking again in 2025!
