US Treasury rates continue to drift lower, with the 10-year rate down 1bp to just under 2.20%. The chartists will be eyeing up the 2.16% level, which is the low for the year reached mid-April and the 200-day moving average.
With speculative net long positioning in 10-year futures not seen for a decade and rates close to their year-to-date low, the market is backing the view that the US Fed will ultimately back down from its policy guidance of a series of rate hikes through to end-2019.
The recent dataflow might well be supportive of that view for now, but if recent weakness in inflation does prove to be temporary then there could be an unwelcome sell-off for traders later in the year.
With the tailwind of falling global rates, yesterday NZ long term rates reached fresh lows for the year, with 5 and 10-year swap rates closing at 2.705% and 3.19% respectively. It’s another full economic calendar ahead, with focus on tonight’s US ADP employment and ISM manufacturing data.
Daily swap rates
Select chart tabs
Jason Wong is on the BNZ Research team. All its research is available here.
4 Comments
With speculative net long positioning in 10-year futures not seen for a decade and rates close to their year-to-date low, the market is backing the view that the US Fed will ultimately back down from its policy guidance of a series of rate hikes through to end-2019.
Hmmmmm.....
Where it all becomes truly unmoored from reality is when everyone is doing the same thing, when there aren’t just “little versions of LTCM” out there but instead nothing but LTCM’s. You have math that shows a positive discounted present value of a complex series of transactions that gives you a credit on the balance sheet of a big bank dealer who obtains balance sheet capacity by doing the same kind of thing with some other counterparty who does the same with another and so on and so on. The monetary world becomes an impenetrable series of traded liabilities anchored to reality only by regressions, expectations for future cash flows that can accomplish what fifty years ago only a deposit account could.
“Something” changed in the middle 1990’s, a genie set free from an evolutionary bottle that was downplayed and understated contemporarily even when the dangers occasionally forced themselves upon present time. There is nothing wrong with trying to forecast the future, nor even in trying to figure out what the future may be worth today. But turning that intangible expectation into something valuable, on terms equivalent with money, is a leap too far. The costs are nearly ten years of global depression, an enormous sum already but with no end yet in sight. [my emphasis] Read more
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.