WASHINGTON: Unemployment near a 20-year low screams at the U.S. Federal Reserve to raise interest rates or risk a too-hot economy. The bond market, not far from a state that typically precedes a recession, says not so fast.The decision of which to heed looms large when the Fed's interest-rate setters meet next week. Which path they follow will begin to define whether Chairman Jerome Powell engineers a sustained, recession-free era of full employment, or spoils the party with interest rate increases that prove too much for the economy to swallow.New Fed staff research and Powell's own remarks seem to put more weight on the risks of super-tight labor markets, which could mean a shift up in the Fed's rate outlook and a tougher tone in its rhetoric.Goldman Sachs economists, for instance, contend the Fed's "optimal" rate path is "well above market pricing under a broad range of assumptions." They see four increases likely next year, while investors expect only one or two, a significant … [Read more...] about Fed’s Powell between a rock and hard place: Ignore the yield curve or tight job market?
Current 2 year treasury yield
Asian stocks rose across the board and long-term U.S. Treasury yields hovered near four-month highs on Wednesday with investors looking past the latest escalation in the U.S.-China trade feud, seen by some market participants as less severe than expected. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent. Hong Kong's Hang Seng was up 1.1 percent and the Shanghai Composite Index rose 1 percent following a surge of 1.8 percent the previous day. Australian stocks added 0.45 percent, South Korea's KOSPI dipped 0.2 percent and Japan's Nikkei rose 1.5 percent. Wall Street shares posted a broad-based rally on Tuesday amid emerging views that the U.S.-China trade dispute's impact on world growth might not be as severe as previously feared. "The broader equity markets are able to regroup now that the latest phase of the U.S.-China trade war is over," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. "There was relief as the United … [Read more...] about Asian stocks, U.S. Treasury yields climb as trade row fails to dent confidence
WASHINGTON: Federal Reserve officials are scouring new niches of the financial markets to find signals accurate enough to warn the central bank when it is time to stop hiking interest rates before they risk tipping the economy into a recession.In the run up to previous downturns, the Fed has jacked interest rates to restrictive levels as it sought to temper inflation. This time, the central bank hopes for a softer landing with rates moving just high enough to avoid overheating without ending a nearly decade long expansion.It is a tricky exercise that pits standard views about the importance of longer term yield curves as signs of recession risk against new variations that look at shorter term interest rates. But it could influence just how far the Fed goes in its current rate hiking cycle.New research from staff economists Eric Engstrom and Steven Sharpe, presented at the Fed's June meeting, suggests that some of the traditional warning signs of recession, such as the gap in interest … [Read more...] about Goodbye inverted yield curve? Fed looks for alternative signals to guide policy
Italy’s president rejected euroskeptic economist and former banker Paolo Savona for finance minister. He must now form a new government or call for another election. US yields are sharply lower as money pours into safety. US Treasury yields are sharply lower Tuesday morning as traders have awakened to growing political turmoil in Italy after President Sergio Mattarella rejected euroskeptic economist and former banker Paolo Savona for finance minister. Now Mattarella must form a new government or call for another election. Heavy buying pushed the benchmark 10-year yield down as much as 13 basis points to 2.79%, its lowest level in 7 weeks. Here’s a look at the scoreboard as of 7:04 a.m. ET: 2-year -6 bps @ 2.42% 3-year -8 bps @ 2.53% 5-year -9.4 bps @ 2.67% 7-year -9.9 bps @ 2.79% 10-year -8.7 bps @ 2.84% 30-year -6.8 bps @ 3.02% Buying has flattened the yield curve, with the 2-10-year spread … [Read more...] about Treasury yields plunge as Italy’s political turmoil sparks safety bid
The Asian Development Bank’s March regular survey of nine domestic bond markets, with insights from the last quarter of 2017 through February, alerted the region to higher long-term government yields and private financial stability concerns around global central bank liquidity retreat and economic growth uptick. Market size topped $12 trillion at year-end, and mainland China accounted for half of final-quarter issuance as the government-corporate split stayed 65%-35%. It is 70% as a portion of East Asia GDP, and net overseas investor inflows were strong, with Malaysia in particular benefiting while Korea was the exception with outflows. From December-February 10-year instrument rates rose everywhere but in Vietnam’s smallest $50 billion market. The report suggested that Japan’s March decision previewing 2019 monetary policy “normalization” with the US and EU would reinforce this trend, alongside the region’s steeper 3% inflation forecast with another … [Read more...] about Asia local bonds trace yield and leverage tales