U.S government bond prices continue to rally, pushing the yield on 10-year notes further below +3% as investors continue to scramble into longer-term bonds.
Concerns about trade tensions with China remain, despite the 90-day truce on tariffs. Investors are also less confident about the ability of the Fed to continue to raise interest rates on the path that policy makers had penciled in at their September meeting.
The Fed was forecasting one more rate increase this year (Dec 19 Fed funds are pricing an +83% odds for an xmas hike) and three in 2019.
Fed funds futures indicate the probability of four Fed rate increases by the end of 2019 is +9%, down from +26% a month ago. Odds of two increases or fewer rose to +67%, up from +41% in the same period.
The yield on the benchmark 10-year Treasury note fell to a recent +2.948% from +2.990% Monday.
U.S 2-yr: flat at +2.831%
10-yr: -4bps at +2.948%
30-yr: -7bps at +3.21%
2-10 spread: -4bps at +0.12%
Fed’s Williams (NY, moderate, voter) comments:
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