Wednesday, February 8, 2023

Data shakes US bond yields, but remains lower after Powell’s speech

Nuevanew yorkDec 1 – Softening inflation in October helped keep US Treasury yields low on Thursday, with Federal Reserve Chairman Jerome Powell saying the central bank could slow the pace of rate hikes at its policy meeting this month.

* The consumer spending price index rose 0.3%, the same as in September, and for the 12 months to October the index rose 6.0%, following a 6.3% increase the previous month.

* The consumer price index, excluding volatile components of food and energy, rose 0.2%, a tenth less than expected, after a 0.5% gain in September.

* Bond yields trailed slightly from previous declines, but that was likely due to month-end unwinding of positions and a sharp move in bond prices after Powell spoke, said Kim Rupert, director global fixed income manager at Action Economics San. in Francisco.

* “We’re going nowhere today and we’re going to maintain most of tomorrow’s rally,” Rupert said, adding that Powell favored monetary easing.

* The yield on the two-year bond, which moves in step with rate expectations, fell 5.2 basis points to 4.320%, while the yield on the 10-year bond fell 8.8 basis points to 3.613%.

* The yield curve, which measures the difference between yields on two-year and 10-year Treasuries, inverted at -70.9 basis points.

* Investment, when returns on short-term debt are higher than long-term debt, indicating an impending recession.

* “The yield curve is very inverted,” said Nancy Davis, portfolio manager at the Quadratic Interest Rate Volatility and Inflation Hedge ETF ivol,

* “The market thinks the Fed is going to raise (rates), but it thinks the Fed is going to create a recession, that’s the consensus right now,” he said.

* The yield on the 30-year Treasury note fell 8.3 basis points to 3.740%.

* The five-year dollar inflation-linked swap, which is considered by some to be a better indicator of inflation expectations due to potential distortions due to the Fed’s QE, stood at 2,560% at the time of writing.

Nation World News Desk
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