Benchmark Treasury yields headed down Friday as the Federal Open Market Committee is scheduled to meet next week to decide on what will most likely be another interest rate hike in 2018–possibly the third of the year.
The benchmark 10-year yield went down to 3.07 and the 30-year yield headed lower to 3.206. In the meantime, short-term yields showed the 2-year ticked higher to 2.813 and the 5-year to 2.955 as of 2:30 p.m. ET.
The Fed has already pushed the federal funds rate to 2 and another 25 basis points would leave it at 2.25–the same level where it was 10 years ago.
“The message from this meeting will be continued gradual hikes, with a watchful eye toward risks — to both the upside and downside,” Morgan Stanley economists said in a note.
Source: tradingeconomics.com
The general consensus based on the latest Fedspeak is that the central bank will continue forward with an upward, but steady rate hike. Based on the latest round of economic data, he economy has been full steam ahead highlighted by a strong stock market that has seen the major indexes like the S&P 500 reach record levels.
Steady diet of rising rates is in order
With no signs of slowing, it appears that a steady diet of rising rates is in order, according to Boston Federal Reserve President Eric Rosengren.
“Gradually increasing over the course of this next year makes sense,” Rosengren told CNBC in an interview. “If things work out well for the economy, and that’s what I expect and hope, then we’ll be in a situation where we need to have somewhat restrictive policy over time.”
One possible factor that could derail a potential rate hike is the trade wars, particularly between the United States and China. The Trump administration announced it would be moving forward with imposing a 10% tariff on $200 billion worth of Chinese goods that includes a step-up increase to 25% by the end of the year.
Related: Two-Year Treasury Note Reaches a Decade High
Less than 24 hours later, Beijing announced it will impose $60 billion worth of tariffs on U.S. goods beginning on Sept. 24.
“It will be enough for the Fed to ask ‘what is going on’, said Seth Carpenter, chief U.S. economist at UBS.
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