Higher US Treasury yields have brought the market back closer to what the Fed is thinking

<p>Remarks from Deutsche Bank Securities economists on higher yields, saying the Federal Reserve will welcome these due to how strong the US economy is given recent data and GDP projections. </p><p>Main points:</p><ul><li> Higher yields will serve to tighten financial conditions and lending</li><li>

"I think that the Fed should be comfortable with higher rates, tighter financial conditions, because you know, some of the things that they need to see are slower growth and a labor market that's coming into better balance. Tighter financial conditions will help with that," </li><li>
"I'm not of the view that they are thinking this is an inappropriate tightening of interest rates" </li><li>
Financial conditions had eased a lot earlier in the year
</li><li>
The recent pickup in yields has actually brought the market into better alignment with the Fed's thinking about rates over this year and next</li></ul><p>I posted also from Barclays in their assessment of higher yields not being too bad a thing either:</p><ul><li><a href="https://www.forexlive.com/centralbank/barclays-says-there-is-space-for-higher-us-yields-questions-if-fed-policy-is-even-tight-20230821/" target="_blank" rel="follow" data-article-link="true">Barclays says there is space for higher US yields, questions if Fed policy "is even tight"</a></li></ul><p>The USD has been gathering support from the 'higher for longer' turn. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.