Soothsaying two-year note
Interesting article from Reuters on how the yields on the 2 yr notes have closely predicted the fed rate changes.
-- From Reuters ---
NEW YORK (Reuters) - If you want to know what the Fed's next move will be, look no further than the trusty two-year Treasury note, widely seen as predictive of central bank interest-rate shifts.
A surge in the note's price, and accompanying drop in its yield, suggests investors are increasingly betting that the Federal Reserve's rate-hike cycle has peaked and that after a few months' hiatus the bank's next move will be to cut rates.
"The debate about easing rather than hiking is already taking place," said T.J. Marta, fixed income strategist with Royal Bank of Canada Capital Markets in New York.
Yields of Treasury notes and bonds of all maturities are well below the psychological 5 percent mark and further beneath the 5.25 percent of the overnight lending rate set by the Fed.
On Wednesday, the yield on benchmark 10-year notes slipped to a fresh five-month low of 4.76 percent on added signs that U.S. economic growth is slowing. The yield on two-year notes , which respond closely to expected shifts in the benchmark overnight federal funds rate, dipped to a near five-month trough around 4.82 percent, a hefty 43 basis points below the overnight lending rate.
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Assuming there are no major signs of inflation, it'll be interesting to see if this holds out. Other articles talk about how the collective wisdom of the bond market is quite good at predicting interest rate movements.
-- From Reuters ---
NEW YORK (Reuters) - If you want to know what the Fed's next move will be, look no further than the trusty two-year Treasury note, widely seen as predictive of central bank interest-rate shifts.
A surge in the note's price, and accompanying drop in its yield, suggests investors are increasingly betting that the Federal Reserve's rate-hike cycle has peaked and that after a few months' hiatus the bank's next move will be to cut rates.
"The debate about easing rather than hiking is already taking place," said T.J. Marta, fixed income strategist with Royal Bank of Canada Capital Markets in New York.
Yields of Treasury notes and bonds of all maturities are well below the psychological 5 percent mark and further beneath the 5.25 percent of the overnight lending rate set by the Fed.
On Wednesday, the yield on benchmark 10-year notes
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Assuming there are no major signs of inflation, it'll be interesting to see if this holds out. Other articles talk about how the collective wisdom of the bond market is quite good at predicting interest rate movements.
posted by Praveen at 6:04 PM
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