Home » US yields fall as growth concerns mount due to aggressive Fed
News

US yields fall as growth concerns mount due to aggressive Fed


Links to breadcrumbs

PMN Economy PMN Business

Author of the article:

Reuters

Gertrude Chavez-Dreyfuss

Article content

NEW YORK — US Treasury yields fell

choppy trading on Wednesday, followed by losses on Wall Street,

after poor US housing data added to growing concerns over the slowdown

amid aggressive monetary tightening by the Federal Reserve.

That said, a steep path for US interest rates remained the

prevailing market consensus.

“We see growth slowing in the US. The question is how?

much will it slow down and will it actually start?

continued sluggishness,” said Bill Merz, head of US fixed income

Advertisement 2

This ad hasn’t loaded yet, but your article continues below.

Article content

Bank wealth management in Minneapolis.

“That’s a big if, and right now we’re just seeing signs of…

softening of the data and tighter financial conditions.”

The Fed tries to temper demand so that inflation falls,

and some of it works through expectations rather than the

actual act of walking fares, Merz said.

“Such extreme rate hikes are expected that the current

activity begins to slow down. But we don’t really know if we’re there

not that point yet. We have not seen enough evidence that

expectations are starting to influence interest rate hikes

point,” he added.

A solid US 20-year bond auction also added to bids on

treasure chests.

US benchmark 10-year yields hit a weekly high of 3.015%

amid ultra-hawkish comments from Fed Chair Jerome Powell on

Advertisement 3

This ad hasn’t loaded yet, but your article continues below.

Article content

Tuesday. But yields fell below 3% after US housing weakness

starts number.

Powell said on Tuesday the Fed would raise interest rates if…

high as needed to curb a rise in inflation, he said

threatens the foundation of the economy.

“If that means going beyond commonly understood levels of

‘neutral’ we won’t hesitate to do that,” Powell said to a wall

Street Journal event, referring to the speed at which economic

activity is not encouraged or restricted.

Interest rate futures have priced in a Fed Funds rate of

2.82% at the end of this year, compared to the current level

of 0.83%. Futures have also factored in about 197 basis points

of cumulative increases in 2022.

The decline in US home starts and construction permits amid

Advertisement 4

This ad hasn’t loaded yet, but your article continues below.

Article content

rising mortgage rates weighed on government bond yields as equities fell.

US housing market fell 0.2% to an annualized rate of 1,724

million units last month, with March data revised lower to a

of 1.728 million units.

Permits for future housing construction in April also fell by 3.2%.

In afternoon trading, 10-year yields fell 7 basis points to

2.896%, while the 30-year bond yield

decreased by 8 basis points to 3.08%.

At the front of the curve is the US two-year yield, which

sensitive to Fed expectations, were down 2.6 basis

points at 2.671%.

The yield curve has flattened further, with the spread

between US two- and 10-year yields cut to 22 bp

Wednesday’s 20-year auction in the US was well received and stopped

due to a high efficiency of 3.290%, lower than the expected rate at

Advertisement 5

This ad hasn’t loaded yet, but your article continues below.

Article content

the offer period. Yet this was the highest yield ever

as the maturity was reintroduced in May 2020.

The bid-to-cover ratio, a measure of demand, of 2.5 was

lower than last month’s auction.

May 18 Wednesday 15:01 New York/1901 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 1.0225 1.0394 -0.031

Half-yearly accounts 1.5 1.5325 -0.015

Two-year bond 99-174/256 2.6694 -0.029

Three-year bond 99-190/256 2.8405 -0.041

Five-year bond 99-84/256 2.8965 -0.049

Seven-year bond 99-184/256 2.9199 -0.075

10-Year Bond 99-224/256 2.8895 -0.081

20-year bond 86-244/256 3.2776 -0.093

30-Year Bond 96-40/256 3.0721 -0.092

DOLLAR SWAP SPREAD

Last (bps) Net

Change

(bps)

US 2-Year Dollar Swap 27.75 0.25

scatter

US 3-Year Dollar Swap 13.50 1.25

scatter

US 5-Year Dollar Swap 3.00 0.00

scatter

US 10-Year Dollar Swap 5.75 -0.25

scatter

US 30-Year Dollar Swap -27.00 -1.00

scatter

(Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan

oats)

Share this article in your social network

Advertisement

This ad hasn’t loaded yet, but your article continues below.

By clicking the sign up button, you agree to receive the above newsletter from Postmedia Network Inc. receive. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Postmedia Network Inc. † 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

Comments

Postmedia is committed to maintaining a lively yet civilized discussion forum and encourages all readers to share their thoughts on our articles. It can take up to an hour for comments to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We’ve enabled email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update in a comment thread you’re following, or a user follows comments. Visit our Community Guidelines for more information and details about customizing your email settings.

This post US yields fall as growth concerns mount due to aggressive Fed

was original published at “https://financialpost.com/pmn/business-pmn/u-s-yields-drop-as-growth-worries-mount-amid-hawkish-fed”

About the author

admin

Add Comment

Click here to post a comment

Your email address will not be published.