Two-year US Treasury bond yields rise to nearly 15-year high before Fed

By Herbert Lash

NEWYORKSep 20 -The yield on two-year US Treasury bonds, a rough indicator of interest rate expectations, rose to its highest level in 15 years on Tuesday, a day before the Federal Reserve probably raise rates 75 basis points in its fight against inflation.

* The two-year bond is highly sensitive to changes in monetary policy expectations and reached 3.992% early on Tuesday. The last time its yield exceeded 4% was on October 18, 2007.

* The Fed will announce its monetary policy decision on Wednesday. Money markets are fully pricing in a 75 basis point rate hike, while the probability of a higher one has shrunk to 16%, according to FedWatch. CME.

* Sweden’s central bank raised interest rates a percentage point higher than expected to 1.75% and warned of further hikes, joining others around the world that are also raising rates to control the inflation.

* Fed Chairman Jerome Powell will stick to his pro-tightening stance and desist from offering the dovish tone that has fueled recent post-meeting rallies, said Johan Grahn, chief strategist at ETFs at AllianzIM.

* Benchmark 10-year Treasury yields soared to 3.604% before paring some gains. The yield eventually rose 8 basis points to 3.569%, having topped 3.5% for the first time in 11 years on Monday.

* The two-year yield advanced 1.2 basis points to 3.958%.

* The gap between the two-year and 10-year yields reached -47.5 basis points, approaching its largest negative difference since August 10, when it hit -56.2 basis points. The gap narrowed later in the session to -39.1 basis points.

* The 30-year Treasury bond yield rose 7.4 basis points to 3.579%.

Leave a Comment

Your email address will not be published.