© Archyde.com/Brendan McDermid
Traders work at the New York Stock Exchange as a television shows footage of Federal Reserve Chairman Jerome Powell speaking.
By Tom Westbrook
SINGAPORE, March 22 (Archyde.com) – U.S. Treasury sales deepened on Tuesday, with a widely-watched section of the yield curve holding just above a two-year low hit the previous day, amid bets of large increases in interest rates during the rest of the year.
* Federal Reserve Chairman Jerome Powell said on Monday that policymakers must act “quickly” in the face of accelerating inflation, and raised the possibility of 50 basis point hikes, prompting a sharp sell-off. in the bond market.
* Money markets have priced in up to 190 basis points of cumulative rate hikes through December, with traders expecting the Fed to raise rates by as much as 50 basis points at its next meeting in May.
* “This is going to be a cycle of rapid hikes and markets are increasingly skeptical of the Fed’s ability to deliver a soft economic landing,” said Samy Chaar, chief economist at Lombard Odier in Geneva.
* Ten-year note yields are also underperforming three- and five-year notes – inverting part of the curve – on expectations that anticipated hikes will hurt growth.
* The narrow spread between two-year and 10-year bond yields narrowed to 13.5 basis points. On Monday, this spread touched 11.4 basis points, its lowest level since March 2020.
* Two-, five-, 10- and 30-year bond yields rose further on Tuesday, hitting their highest since 2019.
* The two-year yield rose as much as 7.4 basis points in Asia to 2.193%, its highest since May 2019. The rate has risen for eight straight months and jumped 74 basis points so far in March. The benchmark 10-year note yield was up 4.5 basis points at 2.3460%.
(Additional reporting by Saikat Chatterjee in London; Spanish editing by Carlos Serrano)