Bond prices dip, leaving yields inverted ahead of Fed minutes
U.S. bond prices nudged lower on Wednesday, leaving the Treasury yield curve inverted, as traders waited for the latest update on Federal Reserve thinking.
The Fed is being forced to raise short term interest rates... U.S. bond prices nudged lower on Wednesday, leaving the Treasury yield curve inverted, as traders waited for the latest update on Federal Reserve thinking. The Fed is being forced to raise short term interest rates to combat rampant inflation, and this is reflected in higher 2-year bond yields. Meanwhile, traders reckon the Fed’s action will contribute to weaker economic growth in the longer run, and so 10-year yields are now dipping in response.
“With increasing anticipation of an incoming recession in the U.S., the front end of the U.S. yield curve is now pricing in a 3.33% terminal rate in the Fed Fund in this rate hike cycle, nearly half a percentage point below the median projection of 3.8% by the Fed in its June FOMC dot-plots,” said the strategy team at Saxo Bank.
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