U.S 10-year Treasury yield falls below 3%

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:

  • The Fed has attained its dual mandate; continues to expect further gradual rate hikes
  • Will continue to evaluate incoming data as Fed decides rate path.
  • Expects economy to grow at +2.5% next year.
  • Sees price inflation rising above +2%, but no sign it will rise too high.
  • Wage growth to pickup some more and should push inflation a bit above 2%
  • Many indicators show labor market is quite strong and healthy
  • Data we are seeing is coming in at the strong end of expectations
  • Still see strong tailwinds for 2019 growth
  • Fed will be more data dependent going forward
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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell