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16 Sep 2015
US yields pointing towards Fed rate hike – BBH
FXStreet (Delhi) – Research Team at BBH, suggest that US yields were higher yesterday, and have hung on to the bulk of the gains today, pointing towards a rate hike. The US 2-year premium jumped yesterday to its highest level since 2006, pushing just over 103 bp (where it stands today).
Key Quotes
“One may be tempted to say that this was a result of the stock market rally, but the September Fed funds futures imply a slightly higher yield and the dollar is stronger.”
“The US 2-year began the year near 75 bp. Yesterday, the US 2-year yield reached a four-year peak near 81 bp. Despite many not expecting the Fed to hike tomorrow, the backing up of the 2-year yield stands out.”
“Some want to dismiss it as a function of liquidity, but this is hard to verify. At the same time, the German 2-year yield is at -23 bp. Since it is lower than the deposit rate, it cannot be bought in the ECB's asset purchase program. While the timing of the Fed's lift-off remains the key focus, ECB's Constancio has reiterated Draghi's intimation that there is scope to expand the ECB's QE.”
Key Quotes
“One may be tempted to say that this was a result of the stock market rally, but the September Fed funds futures imply a slightly higher yield and the dollar is stronger.”
“The US 2-year began the year near 75 bp. Yesterday, the US 2-year yield reached a four-year peak near 81 bp. Despite many not expecting the Fed to hike tomorrow, the backing up of the 2-year yield stands out.”
“Some want to dismiss it as a function of liquidity, but this is hard to verify. At the same time, the German 2-year yield is at -23 bp. Since it is lower than the deposit rate, it cannot be bought in the ECB's asset purchase program. While the timing of the Fed's lift-off remains the key focus, ECB's Constancio has reiterated Draghi's intimation that there is scope to expand the ECB's QE.”