Bond market selloff can’t continue until CPI data, stocks rebound on Bostic and as yields drop, bitcoin eases

US stocks are rising after both Fed’s Bostic assuaged investor fears of an overly aggressive Fed tightening cycle and as the global bond market selloff takes a break in anticipation of tomorrow’s inflation report. Fixed-income traders made it clear early that the 10-year Treasury yield would not break above the 2.00% level before Thursday’s inflation data.  Many investors remain optimistic about the economy going forward and that even if we have a hot inflation report, appetite for US stocks will still be strong despite the Fed raising rates possibly five times this year.

Fed Speak
Risk appetite remained intact after Fed’s Bostic’s CNBC interview assuaged concerns that the Fed will aggressively tighten monetary policy. Bostic’s comments were optimistic about how the economy will handle the first round of rate hikes and the start of the balance sheet runoff. Bostic sees inflation easing soon and anticipates the Fed’s preferred inflation gauge will drop to 3% by the end of this year.

Bostic noted that the inflation rate is not as important as the trajectory. Bostic is expecting three rate hikes this year but is leaning towards four. Bostic wants balance sheet reduction to start as soon as possible. Bostic is in the camp that believes that a lot of the excess liquidity can come off and won’t represent meaningful tightening. The first part of the balance sheet runoff, around 1 trillion dollars, should go smoothly.

Bitcoin steadies

Bitcoin prices steadied after the Russian government bodies outlined rules for how they will regulate cryptos. What makes this decision all the more important is that the central bank also is on board. Russia appears poised to recognize cryptocurrencies as a form of currency. Anytime a major bitcoin country embraces cryptos, that is great news for the cryptoverse.

Bitcoin also got a mini boost from the mild risk-on mood on Wall Street. The main event on Wall Street is tomorrow’s inflation report and that should determine traders’ expectations as to how large of a rate increase the Fed will start in March.

Bitcoin needs a major catalyst or fresh money to send it above the USD 50,000 level. Crypto traders can feel spring is not too far and the worst of the crypto winter appears to be over.  Now that bitcoin has stabilized above the USD 40,000 level, many retail traders feel they have the greenlight to pile back into altcoins.

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