Treasury Yields Hammerlocked as Fed Optimism Meets Global Risks
- 10-year rate within a 14-basis-point range over past two weeks
- Week ahead includes report on U.S. GDP, address by Clarida
Headwinds from Rome to Riyadh have helped to cap the recent surge in Treasury yields, while the combination of Federal Reserve policy tightening and increasing debt supply appears to be providing a firm floor for U.S. rates.
The tug-of-war that has kept America’s 10-year yield boxed within a 14-basis-point range for the past two weeks looks set to continue as traders weigh the U.S. growth outlook against risks that could spur a flight to haven assets. Minutes from the Fed’s last gathering indicated it’s willing to keep lifting rates even to the point of restricting growth, providing a boost to yields. At the same time, the market is on edge over Italy’s budget standoff, Brexit and the death of Saudi Arabian journalist Jamal Khashoggi. Equity volatility is also a risk, as are signs of dollar funding pressures at the front end.