Risk Assets Pullback on Hawkish Fed MinutesJan 6, 2022
December’s Fed meeting minutes released yesterday pointed towards quicker and more aggressive rate hikes than expected. Members of FOMC also expressed interest in reducing the size of the Fed’s $8.7T balance sheet sooner than anticipated, the combination of which sparked a spike in market volatility.
Risk assets like equities and crypto assets reacted swiftly to the news, tumbling after the minutes were released. The S&P 500 fell ~1.9% yesterday, its largest one day % decline since Thanksgiving; BTC and other major crypto assets fell anywhere from 5-15% over the last 24 hours as price declines triggered large liquidations (more on this below).
Long-dated U.S. Treasuries also saw yields rise across the entire curve, leaving investors with few places to hide. Bond yields have been moving higher for much of the last month in anticipation, pushing the 10-year yield to its highest level since the end of March 2021.