US 10-year Treasury yields were hovering around 2.28%-2.30% for much of the session before US Treasury Secretary Mnuchin commented that ultra-long bonds could “absolutely” make sense for the US.
This saw rates climb to as high as 2.335%, before settling at the current 2.325%.
Mnuchin has previously suggested that issuing longer term bonds in the current low rate environment makes sense, so we don’t really see any news in his overnight comment. The market is probably somewhat jittery ahead of Thursday’s FOMC announcement.
We expect the Fed to leave rates unchanged and keep its options open for raising rates again next month. Odds of a June hike are around 67% according to CME Group calculations.
There is little to say about yesterday’s rates trading, with swap rates moving by less than 1bp across the curve, with the 2-year rate at 2.30% and the 10-year rate at 3.375%.
After today’s close, the RBA will release a policy update, and its neutral tone should pass with little sustained market reaction.
Daily swap rates
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Jason Wong is on the BNZ Research team. All its research is available here.
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