Treasury yields have risen the past 10 times the Federal Reserve posted meeting minutes, a sign the release hasn’t become a “relic” even after the central bank began holding press conferences following its sessions, according to Deutsche Bank AG.
“The FOMC minutes have proved important in bridging the gap between what the dovish Fed leadership are thinking, and the evolving view among FOMC members,” Alan Ruskin, global head of Deutsche Bank’s Group of 10 foreign exchange, said today in a report.
Minutes of the Federal Open Market Committee’s June 17-18 meeting are scheduled to be released at 2 p.m. in Washington.
U.S. 10-year note yields increased from 1 to 11 basis points on the days from April 10, 2013 through May 21 that the meeting notes were released, Ruskin said, citing Deutsche Bank and Fed statistics. They had fallen five days later eight times, he said.
The benchmark note’s yield rose two basis points, or 0.02 percentage point, to 2.57 percent at 11:43 a.m. New York time, according to Bloomberg Bond Trader prices. The increase came on speculation the minutes will show policy makers are leaning toward raising rates earlier than forecast next year.
The Fed at its June meeting trimmed monthly bond buying by $10 billion, to $35 billion, versus $85 billion last year, while holding the key interest-rate target in a range of zero to 0.25 percent.
Fed Chair Janet Yellen said after the session that while economic growth is bouncing back, a weak labor market “remains significant.” Policy makers met before data showed employers added more than 200,000 jobs for a fifth month in June.
Employers added 288,000 workers last month, beating the 215,000 median forecast of 94 economists surveyed by Bloomberg. The unemployment rate dropped to an almost six-year low of 6.1 percent, from 6.3 percent.
“The last meeting took place before the latest strong labor market data,” Ruskin said. “It will probably only take one or two additional months of strong employment reports for this to show up in more hawkish policy urgency.”
The Fed’s U.S. Trade-Weighted Major Currency Dollar Index has increased on 11 of the past 13 days the Fed released meeting minutes, signaling the increase in yields has “largely been translated in orthodox fashion to a stronger U.S. dollar,” Ruskin said.
This suggests “there is some sustenance to any hawkish FOMC minutes in the FX world, even if the bond market follow-through is limited,” Ruskin said.