As in June, Fed policymakers continue to believe that the central bank’s benchmark overnight interest rate will reach maximum this year of between 5.50% and 5.75%, just a quarter of a percentage point above the current range.
From there, the Fed’s updated quarterly projections show a rate drop of just half a percentage point in 2024, compared to the full percentage point of cuts that his authorities had planned at the June meeting.
“It seems like the Federal Reserve is trying to send as tough a signal as possible,” said Gennadiy Goldberg, head of rates strategy at TD Securities in New York. “It’s just a question of whether the markets will listen to them…how the data evolves from here.”
Two-year debt yields hit 5.152%, the highest since July 2006, before retreating to 5.120%.
Benchmark 10-year note returns jumped to 4.359% and were later trading at 4.339%. On Tuesday they reached 4.371%, the highest level since 2007.
The inversion of the yield curve between two- and 10-year bonds deepened to -78 basis points.
Federal Reserve Fund futures traders continue to price in only a partial probability of another rate hike, with a 33% chance in November and 47% in December, according to CME Group’s FedWatch tool.
Source: Ambito
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