US bond yields rebounded from 6-week lows; With the Fed in the crosshairs

Written by Karen Britel

the newYorkNov.17 – The 10-year US Treasury yield rose from a six-week low on Thursday as investors weighed how far the Federal Reserve will raise interest rates as inflation appears to be moderate although growth appears to be stagnant. Still going strong.

* Yields have eased since data last week showed consumer prices rose less-than-expected in October, a change confirmed on Tuesday by a weaker-than-expected report on producer prices for the forecast month.

* However, Wednesday’s retail sales data indicated strong demand that could keep prices and growth under pressure and make the US central bank more likely to tighten further.

* Investors expect that the more the Fed raises interest rates and the longer they stay at those levels, the worse the impact on the economy will be.

“The discourse has shifted quickly towards a more moderate inflation path next year and what will happen if there is a significant slowdown in growth and a recession,” said Subhadra Rajappa of Societe Generale in New York.

* Yields were slightly higher on Thursday, but the move was seen as lacking a key driver and likely due to consolidation.

* The benchmark 10-year bond yield worked at 3.784%, after falling to 3.671% the day before, the lowest since Oct. 5. The two-year paper rose to 4.452%, above the two-week low of 4.290% reached last Thursday after data from CPI.

* Investment in key parts of the yield curve remained extremely negative amid fears of an imminent recession.

* The yield curve between the two- and 10-year notes was at -67 basis points, close to levels last touched in 2000. The spread between the three-month note and the 10-year note was -48 points. Basic.