Pretty much muted market reaction to the Mnuchin vs Fed latest "conflict". The new incoming Treasury secretary can change the situation, so this is nothing overly huge, and most probable just a way to annoy the new administration. As Nordea points out, Mnuchin's decision to end the corp credit facilities could well end up Fed going for the big operation twist and more asset purchases. Read across could be the relative long EM trade that started working recently;
"The resurgence of EM FX has continued through the week, maybe as Mnuchin’s Care Act tricks make an aggressive Operation Twist from the Fed more likely in December. EM should be on the receiving of flows should the Fed decide to bring down the yield curve artificially in December (again)".
Just as Nordea points out;
"The cyclical backdrop is much stronger today than in 2011-2012 when the first Twists were conducted"…just look at that PMI chart.
A possible quick move higher in US 10 year would not bode well for the EM space, but the investment bank points out accurately;
"The Fed is substantially less likely to allow such curve steepening to happen fast today than in e.g. 2016-2017, why a more managed or smoothened move higher in the long end is the most likely outcome".
On the other hand, pros predicting the US 10 year has worked so so (chart 3).