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10-year US Treasury yields hit fresh multi-week lows below 1.45%

  • Yields on 10-year US Treasuries hit fresh multi-week lows below 1.45% on Tuesday.
  • Recent Fed news / comments have had moderate implications and could be weighing on yields.

Yields on 10-year US Treasuries They hit fresh multi-week lows on Tuesday after falling below the 200-day moving average (DMA) at 1,449% and last week’s low at 1,436%. Yields are up a bit from session lows at 1.431%, which was their lowest level since late September, and are now back in the 1.45% region. As it stands, 10-year yields are down just under 5bp on the day, with the session starting near 1.50%.

The fall in US 10-year yields comes amid a broader upward flattening movement seen in the US yield curve; 2-year yields were down about 3 basis points to 0.42% and 30-year yields were down almost 6 basis points to just over 1.85%. The drop in yields is due to a further decline in real US yields, rather than a movement in inflation expectations. As a reference, 10-year TIP yields fell more than 5 bp on the day to just under -1.15%, leaving them only a few bps above historical lows close to -1.20%, while yields on 30-year yields fell by a similar margin below -0.55%. Meanwhile, 10-year and 30-year equilibrium inflation expectations (nominal minus real yield) remain flat in the respective regions of 2.60% and 2.40%.

The momentum of docile vibrations gives way

Yields in the US fell sharply towards the end of last week along with their global peers on the back of the moderate bias towards rate decisions from the Fed and the Bank of England, as well as dovish comments from investors. main policy makers of the ECB and the RBA. In the wake of last week’s central bank action, STIR markets have generally been cutting recent aggressive bets, which has hurt short-term returns and longer-term real returns (given that inflation expectations increased in anticipation of more moderate central banks). Tuesday’s price action suggests that this recent moderate price tightening trend still has room to execute.

Recent Fed news / comments have had moderate implications; Fed Vice Chairman Richard Clardia said on Monday that he saw the conditions for a rate hike in late 2022 (versus STIR market prices for hikes starting in September). Furthermore, it appears that the moderately biased Fed Governor Lael Brainard has a good chance of becoming the next Fed chairman. Market prices for rate hikes as early as September 2022 appear vulnerable to further cut. More, though Wednesday’s US consumer price inflation report could throw a wrench in the works if it shows inflationary pressures continuing to mount.

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