U.S. stock index futures ticked higher on Tuesday following the dovish comments from Federal Reserve policymakers, though caution prevailed amid escalating tensions in the Middle East.
Top ranking Fed officials indicated that rising yields on long-term U.S. Treasury bonds could steer the central bank from further increases in its short-term policy rate.
Yield on the U.S. 10-year note came off its 16-year peak on Tuesday as trading resumed in the U.S. bond market after the Columbus Day, also known as Indigenous Peoples’ Day holiday.
“The shift in gears from bear steepening to bull flattening translates only into a fractional easing in financial conditions after the abrupt tightening since mid-September,” strategists at Societe Generale said in a note.
“For some, the change begs the question if bond yields, on both sides of the Atlantic, have now peaked.”
Traders put the chance of interest rates remaining unchanged in November and December at 87% and around 71%, respectively, according to CME’s FedWatch tool.
Investors would keenly watch remarks from Fed Governor Christopher Waller and Fed Bank of Minneapolis President Neel Kashkari during the day.
Meanwhile, Israel said it had re-established control over the Gaza border and was planting mines where Hamas militants had toppled the barrier during their bloody weekend assault, after another night of relentless Israeli air raids on the enclave.