November 5, 2015
By: David R. Pascale, Jr.- George Smith Partners
Today’s remark from Fed Chair Yellen further intensified the speculation for a December ‘liftoff’. Note that the Fed futures market’s probability of a December hike has gone from 35% to over 50% since last week’s Fed Statement.
The 10-Year Treasury jumped from 2.02% to 2.22% since this announcement. The next 30 days will see markets focus closely on the key economic releases.
This week’s employment report (October numbers) may be a big market mover. ‘Short vs. Long’. Since the Fed rate is a short term rate, their actions should affect the shorter term treasuries more than the long bonds. Today saw the 2-Year treasury hit its highest rate in 4 years shortly after Yellen’s testimony.
The 10-Year actually rallied slightly with the yield dropping about 2 bps as traders feel that a rate hike should slow growth and keep inflation in check. Regardless, expect volatility in the 10-Year during the remainder of 2015…stay tuned…