BOND REPORT: 2-year Treasury Yield Climbs After Fed Minutes Say Rates Not On 'preset Course'
August 21 2019 - 3:38PM
Dow Jones News
By Sunny Oh
30-year German government bond auction struggled to draw
demand
Short-term U.S. Treasury yields rose on Wednesday after minutes
from the Federal Reserve's July meeting showed the U.S. central
bank wasn't ready to commit to a series of rate cuts.
What are Treasurys doing?
The 2-year Treasury note yield , sensitive to shifting
expectations for Federal Reserve policy, climbed 5.5 basis points
to 1.569%. The 10-year note yield was up 2 basis points to 1.577%,
while the 30-year bond rose 0.9 basis point to 2.051%.
What's driving Treasurys?
The minutes of the Fed's meeting last month showed that senior
officials preferred to follow a meeting by meeting approach when
deciding on interest rate changes. The minutes said the U.S.
central bank didn't want to give the appearance of moving in a
"preset course," and that July's rate cut was only "part of a
recalibration" of policy.
The minutes also showed most officials didn't see the need to
cut rates to lift inflation expectations, as they expected the
lower inflation readings to be temporary.
San Francisco Fed President Mary Day said
(http://www.marketwatch.com/story/recession-not-on-horizon-feds-daly-says-2019-08-20)a
recession was not on the horizon on Tuesday in written answers to
questions on the Quora website.
See: Fed officials shied away in July from planning future
interest-rate cuts
(http://www.marketwatch.com/story/fed-officials-shied-away-in-july-from-planning-future-interest-rate-cuts-2019-08-21)
In Europe, Germany auctioned off a batch of 30-year bonds at a
record-low yield of negative 0.11% but was only able to sell EUR824
million ($915 million) of the up to EUR2 billion of debt for sale.
The debt sale initially weighed on prices for government paper but
its impact faded by the end of the trading session.
The German 10-year government bond yield rose 1.6 basis points
to negative 0.676%, while the 30-year bond yield traded at negative
0.181%, Tradeweb data show.
What did market participants' say?
On the Fed minutes:
"There was no hint of a "one and done" mentality on rate cuts.
But, many opponents of action this summer cherry picked their way
through the data as they strained to see the brighter side on trade
and inflation," wrote Jim Vogel, an interest-rate strategist at FTN
Financial.
"A quick and major takeaway is there are still many on the
committee who simply do not see lower inflation as a threat. A plea
more cuts are needed quickly to get inflation moving higher will
fall on a lot of deaf ears," said Vogel.
(END) Dow Jones Newswires
August 21, 2019 15:23 ET (19:23 GMT)
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